A WESTERN Queensland producer has come out on the good side of a tumultuous cattle market in the past six months – generating a 40 percent return from cattle he purchased in the third quarter of last year while conditions were dry.

As last year’s cattle market crashed, many producers in western Queensland found themselves in the fortunate position of being able to hold on to stock – with two good wet seasons and an already low stocking rate from prolonged drought. Some saw the excess feed as an opportunity to buy replacements and trade.

One producer, who asked not to be named, told Beef Central he purchased hundreds of cattle from saleyards over an eight-week period four-to-six-months-ago (August-October). He sold them during February at the Blackall and Roma saleyards. BOM’s forecasts at the time presented a pessimistic outlook, season-wise, for the summer months ahead.

A Queensland-specific version of the Eastern Young Cattle Indicator.

During the eight-week period the producer was buying cattle, the benchmark saleyard average, a Qld-specific version of the Eastern Young Cattle Indicator fell from about 574c/kg carcase weight to below 400c. The indicator had climbed above 700c when he sold them.

“Taking into account the purchase price, the freight, the yard costs, interest and we put an agistment rate of $6/head/week, even though we grew them on our own country, it still came out with a 40pc annualised return,” he said.

“We actually didn’t buy them at the bottom of the market, so that return would have been bigger if we bought in October/November.”

The producer was targeting cattle between 250 and 300kg to background them for the feeder market.

“We were looking at the better-quality cattle – Angus, Charolais, Santa Gertrudis – because we wanted to be able to have supermarkets quote on them if we could only get them to a light feeder weight,” he said.

“It was dependent on how the season went for us and when we had the opportunity to sell them.

“The lead of the cattle we sold were heavy feeders, but the majority of the trade cattle we sold were between 350-400kg.”

Taking advantage of grass

The producer said he was not traditionally a cattle trader or backgrounder, and the vast majority of his business was breeding. He said the trading venture was about taking advantage of some of the best seasonal conditions in more than a decade.

“We are not traditionally traders, but our country is suited to it. We had our most feed in 12 years and I thought we really needed to utilise it,” he said.

“We haven’t been able to do it because we had 10 years of a catastrophic drought and it only started raining for us on ANZAC day 2022 – which was the start of a good year that grew a lot of feed but not a lot of grass. We had very good subsoil moisture going into summer 2022, which was a good wet season, and suddenly, our grass started to come back.”

While there was plenty of talk about an El Nino-induced dry summer ahead, he always believed there was a chance of rain this wet season.

“The Bureau of Meteorology was forecasting a dry summer from the El Nino, but there was no mention of the potential for storm rain – which we have seen across a large part of the state,” he said.

Not being too greedy

The producer said he had been talking to a large-scale trader about his investment strategy. He said the discussion created a blueprint for his trading venture over the past six months.

“He gleefully showed me the spreadsheet he was using, which factored in costs and revenue, and had an overall goal of generating a 30pc annualised return. He was buying at a time the market was going up quickly and exceeded that goal by a long way,” he said.

“While the current market hasn’t gone up in the same way, it really instilled the idea of being able to clearly demonstrate return on investment.

“The lotfeeders are good at it and I know in the past some of them have accessed a lot of capital by offering a specific ROI and putting cattle in feedlots.”

He said focusing on the annualised return was also a good way of making disciplined investment decisions.

“There are a lot more risks to consider when putting them in a paddock, but I think it is still a worthy exercise and something we will continue to do,” he said.

“The main idea of the ROI is about being disciplined and not getting too greedy.”