Lotfeeding profitability slips into the red

Jon Condon, 19/05/2011

Profitability in feeding 100-day grainfed cattle appears to have swung back into red-ink territory, after a period before Easter when it was close to breakeven.

An analysis based on yesterday’s spot market for inputs suggested a breakeven figure of 386c/kg dressed weight for 100-day grainfed steers ex-Darling Downs, going on feed today and closing-out on the last day of August.

In contrast, the over-the-hooks forward market price for late August for that same animal is currently in the 370’s with most competitive export processors – 15 to 16c/kg dressed weight below breakeven. That’s worth about negative $53/head.

The calculation is based on assumptions including a 356kg dressed weight, feeder steer purchase price of 190c/kg liveweight, and finished ration price of $270/t.

Total cost calculated was $1362, including feeder steer purchase plus typical feeding cost. The breakeven figure factors in a 1pc mortality rate, but even removing that component only brings the breakeven figure back to 382c/kg.

An identical calculation performed pre-Easter, produced a result extremely close to breakeven.

The big change since then has been in lower finished cattle prices. High volumes of grassfed cattle hitting the market at lower prices has also drawn down the grainfed price, in the short-term, one grainfed analyst said. Consequently the forward price rates for 100-day grainfed cattle have also dropped significantly.

While grassfed steers have borne the brunt of the recent 40c/kg liveweight declines in price, 100-day cattle have also dropped a full 30c/kg since Easter.

“The whole industry has lost $100 a head in export-weight cattle in four weeks,” an analyst said.
Looking back at this same week last year, breakeven was about 10c/kg less than what it is today. But at the same time, meatworks forward rates in late August last year were around 365c/kg, giving a result of negative $40. That’s based on an identical feeder price of 190c and ration price of $240/t. 

• Beef Central plans to regularly publish 100-day grainfed breakeven calculations based on a standard set of variables, ex Darling Downs.



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