The uncertainty surrounding the weather this week, and the impact it may, or may not have on feeder and finished cattle supply and pricing makes for hard-going in today’s fortnightly 100-day grainfed trading budget.

Depending in the extent and volume of rain already recorded, or potentially falling in coming days, outcomes could go in several directions by the time Beef Central does its next trading budget in early March.   

Today’s trading budget calculation is based on our standard set of variables (see full list at base of page), benchmarked on a typical flatback 450kg feeder steer going on feed on the Darling Downs today, and exiting the feedlot after 105 days on June 7.

Today’s calculation suggests a minus $36 result on our typical flatback steer going on feed today, on top of a negative-$12.90 trade last time, and negative $6 four or five weeks ago.

All three are somewhat improved on a loss of $46 in our final breakeven for 2013 reported back in mid-December, influenced mostly by cheaper feeder steer price and better slaughter price since then. That’s been offset somewhat, of course, by higher grain and feed costs.

For today’s budget, and given the weather circumstances, we’ve lifted our flatback feeder steer ex Darling Downs, another 5c, to 180c/kg, through tightness in supply of proper feeder cattle in NSW and southern Queensland. That value is still back 10c/kg on December, however.

That trend is clearly reflected in the Eastern Young Cattle Indicator, which closed yesterday at 303.75¢/kg, up 16¢ on last week, mostly due to the lower supplies available to buyers. Very little of the increase in EYCI value can be explained by improvement in demand, with some time needed for pastures to regenerate to feed young stock, where the rain did fall, and overseas demand holding steady.

There’s certainly evidence of a little more urgency in feeder buying patterns this week, with more interest from traditional processor feedlot customers, as well as others, looking at securing additional cattle, both grain and grassfed prospects, heading into autumn.

Processors adjusting grids to reflect lighter weights

Feeder cattle at lighter weights are being discounted somewhat off these rates, but a point well-worth noting is that some large processors have adjusted grainfed grid structures, with a smaller discount on slightly lighter carcase weights, than what has been seen historically. That makes some of these ‘sub-optimal’ weight feeder steers a more attractive feeding proposition.

Pricing our feeder steer for today’s trading budget at 180c/kg values him at $810, still $45 cheaper than the market back in late November, when tightness of supply was evident.

It’s still a long way better than a record-low 150c/kg liveweight in our budget back in in early June last year, when the steer was worth only $675 due to drought supply pressures.

Ration price unchanged

There’s been no relief from recent hikes in feedgrain price, with finished ration price allocated to today’s grainfed budget kept the same at $370/t. Call Downs custom feeders at the moment, and you’ll find ration quotes varying anywhere from $350/t and +$400, depending on ingredients and likely performance. A $365-$375 range appears most common.

The current ration price represents a $30/t rise since mid-December as drought pressures have impacted on grain. That’s easily the biggest eight-week ration price adjustment since this report was launched back in May, 2011.

The current finished ration price of $370/t is a record for the two and a half years that Beef Central has been reporting this data-set, and appears to be the highest seen since around 2008, when global grain prices sky-rocketed.

The current ration cost represents a total feeding cost over a 105-day program of $580, about $48/head more than mid-December.

This, combined with the current feeder price, gives a total production cost of $1482, about $17 more than last time, influenced by the rise in feeder price.

Cost of gain, using our chosen variables (2kg/day ADG, for 210kg gain over 105 days) now sits at 276c/kg, 11c/kg higher than our mid-January budget. In simple terms, it means that every kilo of liveweight gained in the feedlot is costing at least 50pc more than the ‘kilos you buy,’ at feeder steer purchase.

The cost of gain this time last year was 230c/kg, with rations at $310/t.

Breakeven remains historically high

The combination of the above inputs delivers a breakeven figure in today’s budget of 420c/kg – 6c/kg higher than on our last calculation a fortnight ago, due to the higher feeder steer component.

That breakeven figure has now matched our previous record achieved back in November when feeder prices got to 190c/kg briefly.

The only time it has come close to recent figures was in early 2012, when it got to 412c during a period when feeders went to 215c/kg, and a brief slot during winter last year when the number touched 400c.

Forward pricing sticks at 410c/kg

Based on Southeast Queensland processor quotes yesterday, the forward price for 100-day flatbacks going on feed today and closing-out in June, week-one, is around 410c/kg, unchanged from last time, but 5c/kg higher than our January budget. The last time we saw +400c for 100-day ox was back in 2011 and briefly during the first week of 2012.        

All that delivers a trading budget result of minus $36 on a 100-day feeding program starting today. However that figure, we’d suggest, is ‘still working’ for retained ownership for graziers. And in the current environment, a feedlot outlet is still an outlet for cattle, and a trading loss of $36 still looks an attractive proposition for a producer at Tambo who desperately needs to move cattle.

Looking at finished grainfed cattle forward-bought by processors back in November at contract prices around 390c/kg, they are very much in line with today’s spot grid price slaughter market rate for the same cattle.

There’s some variance in the spot market for 100-day cattle at present across southeast Queensland processors, from a low of 380c to around 405c for better-end 100-day cattle, with 90 as a fair reflection of the mid-point.

That means processors being those November cattle forward are neither better, nor worse-off than if they had procured the same cattle in the spot market yesterday.

• Beef Central's regular 100-day grainfed breakeven scenario is based on a representative standard set of production variables, ex Darling Downs. They include a 450kg liveweight feeder steer fed 105 days; 356kg dressed weight at slaughter; ADG of 2kg; consumption 15kg/day and a NFE ratio of 7.5:1 (as fed); $25 freight; typical implant program. Bank interest is included. It is important to note that variations exist across production models (feed conversion, daily gain, mortality, morbidity, carcase specification); from feedlot to feedlot; and between mobs of cattle. For a more specific performance forecast on a given mob of cattle, consult with your preferred custom feeder.