Angus feeder premiums nosedive, driven by dry conditions and flat consumer demand

Jon Condon, 16/08/2023

THERE’S been a substantial decline in price premiums seen for Angus feeder cattle over equivalent flatback feeders in recent weeks.

While the narrowing trend has been taking place gradually for much of the past six months, it has intensified since early August.

Beef Central first wrote about the decline in Angus feeder premiums in this grainfed trading budget report back on 3 August.

Two key factors are coming into play, supply chain contacts are telling Beef Central:

  • There’s been a sharp rise in turnoff in large cattle-producing (mostly Angus) regions in NSW, as pasture conditions continue to deteriorate sharply, and
  • International demand for better quality, more expensive grainfed beef (including Angus brands) remains flaccid, with cold storage stocks continuing to build-up, both in Australia and overseas

Supporting this beef ‘backlog’ claim is the fact that some large Australian feedlots are currently 20-80 days ‘long’ on cattle (fed beyond their intended feed duration), because of the blockage of beef in the system.

“Feedlot cattle in a ‘holding pattern’ like this inevitably decline in weightgain performance, can get over-fat, and you are basically just burning feed,” one large supply chain manager said.

Feedlot books filling ‘in a matter of days’

This week’s Angus and flatback feeder pricing in northern and southern regions is becoming a little harder to define, because a host of feedlots across Eastern Australia have in fact now closed their books, having filled their requirements ‘in a few days’ for intakes until well into September.

“The shift happened in no-time,” one prominent cattle market observer said this morning.

One company strongly oriented towards Angus issued its feeder grid mid-last week at 365c/kg, and filled its requirement until early September within two days. On Friday afternoon, there were 100 messages (producer inquiries about supply) on the voicemail.

Given the response since its grid withdrawal, the price would now be ‘considerably less’ than 365c/kg, a company contact said.

“I’d put the market for Angus feeders today at no more than 340c/kg, but its hard to peg, because so many feedlot offers have now been withdrawn,” he said.

“Earlier, everyone was getting used to Angus heavy feeder prices around 370c/kg, and we thought it might push back towards 400c,” he said. “Instead, the opposite has happened.”

“The market has now gone from 580c/kg back in October last year to today’s prices, well over $2/kg less. Even three months ago there was still Angus feeders booked at 440-460c.”

“We went into that dry period during July in Central NSW, and a lot of Angus steers got pushed onto the market back then. Now, a lot of other NSW cropping country is near the end of its run, and more feeders are coming forward as weightgain in the paddock starts to slow.”

“It’s possible the reverse in Queensland, where many still have a big body of dry feed. That possibly helps explain why the dip in Angus feeder prices (mostly produced in NSW) has been more severe than for crossbred or flatback types (more common in QLD).”

“The other factor is consumer spending worldwide is now very constrained. We’ve cooked our beef consumer with high prices, to some extent – and they are no longer prepared to bear such high prices on beef, being happy to accept a cheaper option,” one large grainfed beef supply chain contact said.

One contact suggested the Angus premium over flatbacks in today’s market was probably only 25-35c/kg in some parts of the country.

Another of the country’s largest Angus feeders still had 365c/kg for its southern feedyards early last week, but has now stopped quoting altogether due to the rush in supply. In Queensland feedyards, some quotes last week were as low as 335-350c for Angus steers.

Among them, a large grainfed processor/lotfeeder operator has offers showing just a 10c premium for Angus this week in its Queensland yards – 345c versus 335c for flatbacks. In the company’s southern grainfed business, the differential is a little greater – 345c versus 320c for non-Angus flatback types.

“There’s very dry conditions now across large parts of NSW, where there are a lot of Angus, and those feeder cattle are the types that producers are unloading in increasing numbers this month,” a company spokesman said.

“But it’s been a long time since the Angus premium has been this low. It looks like an element of panic has set in,” he said.

“The only thing that’s likely to change the current market sentiment situation is widespread rain.”

AuctionsPlus trends

We asked AuctionsPlus to generate the graph below, showing Angus versus other breeds (excluding Wagyu) for feeders +400kg being sold on the digital marketing platform over the past 12 months.

The graph, current to last Friday’s sale, clearly shows the recent trend described above. In fact Angus last week sold at cheaper rates than other feeders. Worth noting, by far the largest portion of Australian feeder cattle are bought out of the paddock, rather than via saleyard or AuctionsPlus.

History show big premiums

In general terms, Angus feeder premiums over flatback feeders have typically been around 40-50c/kg over the past few years, but boomed to as much as 100c/kg in May last year (see earlier report) during the post-drought recovery period.

The underlying reason for premiums for Angus feeders over flatbacks is not just marbling performance, but also the proliferation of ‘Angus’ brand programs within many grainfed beef supply chains, in an effort to escape the 100-day ‘commodity beef’ tag (see earlier story).

A good indication of spectacular decline in all feeder cattle prices this year was seen in the annual turnoff of Kindee steers through Roma saleyards in late June. The 700 Angus crossbred weaner steers offered this year averaged 360c/kg. Last year the same steers made around 520c/kg, and the year before, 560c.






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