Rises in feeder steer price and ration cost overwhelmed a slightly improved forward finished steer sale price in Beef Central’s latest grainfed trading budget calculated this morning.

Using  our standard set of variables (see list at bottom of this page) we have calculated a net loss of $34 on a flatback feeder steer entering the Darling Downs  feedlot today, and closing-out after 105 days on feed on September 18.

That’s back $38 from a rare $4 net profit on the same exercise calculated three weeks ago (May 16). November was the last time our trading budget showed a profitable trade on 100-day steers.    

By far the biggest influence on today’s result was the increased purchase cost for feeders. After slipping to 150c/kg liveweight in our last budget due to drought supply pressures, today’s allocation for the flatback 450kg feeder steer ex Darling Downs has raised 10c/kg to 160c/kg, on the basis of the mild improvement being seen in the cattle market, due to tightening in supply and rain disruptions.

There was also clear evidence of growing reluctance to sell feeders at earlier lower prices.

The increase in c/kg price values today’s 450kg feeder steer at $720, $45 up on three weeks ago, when the $675 feeder price reached its lowest value seen in Beef Central’s regular trading budget in two years.

This time last year, that steer was worth 195c, representing an 18pc decline, worth $157, in value since.

Ration price lifts

On the basis of recent rises in domestic grain pricing, we’ve lifted today’s ration cost $5/t to $305/t. Given current grain markets, it certainly has the capacity to go higher – particularly if current high demand from feedlots stays strong. That said, many lotfeeders may have grain stocks on hand, purchased leading into the harvest period at lower rates, meaning their contracted ration price might be a little lighter.

A $305/t ration price represents a total feeding cost over 105 days of $477 on our trading steer, up $7 on May 16 budget figures. Combine that modest rise with the higher feeder price, however, and the total production cost rises to $1287, a big $56 rise on the figure from three weeks ago.

Cost of gain, using our chosen variables (2kg/day ADG, for 210kg gain over 105 days) is marginally higher at 228c/kg, up 4c from last time. This time last year, the cost-of-gain was 187c/kg on a $250/t ration price, making today’s figure about 22pc higher.

The variables outlined above deliver a breakeven figure in today’s budget of 365c/kg – a 16c/kg rise on our last calculation, but still way behind a breakeven figure of 400c/kg calculated back in mid-January, and 386c this time last year.

Forward pricing  

Current forward public grid prices for 100-day ox from Southeast Queensland processors for September, week one, are around 355c/kg dressed, up 5c from our previous budget. But in reality, there are likely to be limited forward bids available at this time in the market. With regular end-users already making significant forward sales, space availability is likely to be limited, sources say.

That figure improves a little from the 350c/kg figure quoted three weeks ago – the lowest forward price for 100-day ox seen in this report since May 2011.

The current low numbers reflect over-production of grainfed cattle into the traditional shortfed market, largely due to the large concentration of drought-impacted cattle going on feed early this year, and now closing-out as spot market cattle in bigger numbers.

As mentioned in our intro, all that suggests a trading result on Beef Central’s regular variables today of minus $34.

A point worth noting, however, is the circumstances for those custom-feeding clients not looking to forward-sell their cattle on feed, but prepared to gamble on the spot market, on the expectation of an improving market position in the second half of the year.

Feeding for a 100-day program effectively delivers a three-month delay in sales, which in a market environment like this, with a lower currency, recent rain, and some potential for tightening in supply in the north, may stimulate some owners to hold out for the spot price, come September.  

With those fundamental positives in place, plus big margins being enjoyed by processors, feeding cattle in the current market does present some opportunities under retained ownership to consider deferring selling until the cattle are current.     

Another consideration is that anecdotally, there have been some cattle placed on feed recently that are slightly out of spec, on weight. In some cases it’s why those cattle have been put on feed.

There may not be a liquid forward ‘100-day’ market for those cattle anyway, so for those owners, they may elect to feed-on sub-380kg intake cattle for a few weeks to get them into a more desirable grid slot.  They’re the sort of decisions some retained owners will have to make in coming months, as feedlots and their custom clients look at different marketing options.

20c/kg spot advantage over earlier forward contracts

Looking backwards, at 100-day flatback cattle that went on feed in mid-February for slaughter this week, forward-contract meatworks rates then were around 370c/kg, which is about 20c above where the spot market is today. Processors buying those cattle were about $70 worse off.

• 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.