GRAINFEEDING activity across Australia has declined sharply in the face of short feeder cattle supply and record-high prices, results lodged in the September quarterly feedlot survey released a few minutes ago suggest.
Numbers on feed at the end of September were reported at 788,873 head, down 13 percent from the June quarter, and back almost 173,000 head or 18 percent on this time last year.
Australian cattle feedlot operations hit an all-time record of just short of one million head on feed last December, at the end of two savage years of drought across large parts of eastern Australia. But numbers have fallen almost 210,000 head in the nine months since then, as seasonal conditions improve and feeder cattle become increasingly scarce and expensive.
The quarterly ALFA/MLA survey showed substantial declines in activity in all states – some seasonally-driven, while others were influenced more by price and supply (see graph below).
Queensland lotfeeding operations dropped by about 54,000 head over the three months to September 30 to 461,839 head, – a decline of well over 110,000 head since this time last year. The trend was clearly captured in anecdotal lotfeeder comments provided for our recent grainfed trading budgets, such as this one published on 29 September – click here to view.
Queensland numbers on feed are now at their lowest point since the very wet years of 2011-12, after hitting record highs in September last year of 575,000 head.
New South Wales saw feedlot numbers decline by about 35,000 head during the September quarter, to about 250,000 head, while Victoria fell 17,000 head to less than 47,000 head over the same period. South Australia experienced the biggest percentage drop (42pc), to 9757 head, over the three months from June to September.
Australian Lot Feeders Association president, Tess Herbert said the results indicated the impact the cattle prices were having on feedlot numbers.
“The September survey has shown a further drop on June quarter, given current market conditions,” Ms Herbert said. “The approach taken by lotfeeders to existing market circumstances shows an acknowledgment of the strategic risks that face our industry and an ability to address those,” she said.
Feedlots of all sizes were impacted in the September results, but there was clear evidence of smaller yards 1000-head or less (often operated on an opportunistic basis) showing significant declines in activity in year-on-year comparisons, back about 21pc.
Restockers continue to drive the market
Meat & Livestock Australia’s market information manager, Ben Thomas, said with the prices of feeder cattle being driven up, it had ultimately impacted on the numbers on feed.
“The domestic paddock feeder steer indicator averaged 368.89¢/kg liveweight for the September quarter – up 24pc year-on-year and 19pc higher than the June quarter,” Mr Thomas said.
“Similarly, the national saleyard feeder steer indicator averaged 375.68¢/kg, up 20pc year-on-year and was 18pc higher than the previous quarter.”
Mr Thomas said restockers had been driving the market for young and store cattle due to widespread rain across much of the eastern states during the September quarter.
“This has provided strong competition for feeder buyers and has pushed prices to record levels,” he said.
Lower grain prices, however, continued to partially offset the high cattle prices, and are anticipated to remain low on the back of high global grain supplies. Refer to results in Beef Central’s recent 100-day trading budget calculation.
Domestic grain prices for the quarter were lower than 2015 levels, with wheat ex-Darling Downs averaging $236/t, back 28pc, while barley eased 26pc to $221/t. Riverina wheat prices eased 19pc year-on-year, to $233/tonne for the quarter, while barley slipped 34pc to $178/t.
Fodder prices have followed a similar trend, with Darling Downs cereal and lucerne fodder easing 20pc and 13pc, to $250/t and $360/t, respectively.
3pc decline in grainfed exports
Australian grainfed beef exports for the September 2016 quarter were 3pc lower year-on-year, totalling 65,813 tonnes swt. Despite this, total exports for the year-to-September period were at 196,096t – up 1pc from 2015 levels, driven by larger volumes shipped earlier in the year.
Exports to Japan during the September quarter eased 2pc year-on-year, to 32,370t. An 82pc and 26pc drop in fullset and chuck roll exports, respectively, underpinned the overall decrease, despite increased shipments of blade, brisket and manufacturing. The lower volume to Japan was predominantly the result of tighter Australian cattle supplies, coupled with greater competition from the US. The proportion of grainfed and grassfed beef exports to Japan, which each accounted for 50pc of the total for the year-to-September, illustrated a shift towards grainfed supplies while reduced availability of grassfed product limits exports.
High Hanwoo beef prices in Korea and tight supplies of Australian grassfed beef have seen Australian grainfed exports to Korea increase. Furthermore, as volumes of Australian beef approached KAFTA stipulated safe guard volumes (which have recently being triggered), importers were reportedly pushing to secure product before the 40pc tariff was imposed. Shipments to Korea for the September quarter were 18pc higher than the corresponding period in 2015, at 13,727t. For the year-to-September, volumes were 26pc higher than year-ago levels, at 39,517t. The increase consisted mostly of larger volumes of blade, brisket and chuck roll, which make up the majority of exports to Korea.
Exports of Australian grainfed beef to China for the September quarter lifted 13pc year-on-year, to 7300t, and totalled 17,901t for the year-to-September period, up 21pc.
Volumes to the EU, US and Middle East were down 12pc to 4011t, 61pc to 1864t and 41pc to 1527t, respectively, for the September quarter.
Includes commentary from MLA/ALFA quarterly feedlot survey.