Markets

Feeder & fed cattle prices showing sharp new-season price spikes

Jon Condon, 23/01/2024

THERE’s been a sharp spike in feeder cattle and grainfed cattle prices in the early stages of trading this year, driven by the dramatic seasonal turnaround that’s occurred since November.

Click on image for a larger view

Heavy flatback feeders in southern Queensland that were making 315-320c towards the end of last year are today trading for 350-355c/kg, and higher in places. That’s the best money seen since at least May 2023, before prices (linked to season conditions and BOM forecast) started to slip away.

In early saleyards trading in NSW and QLD this week, even higher prices have been paid for the right article, suggesting feeder availability remains tight. Prospects of further rain later this week (see today’s separate weekly kill report) may be motivating some feeder buyers to secure a few more cattle as a reserve.

This year’s feeder price trend is also reflected in the NLRS feeder steer indicator (see image), which was quoted this morning at 330c/kg, having traded as low as 203c/kg during the depths of the weather concern period in early November.

Forward contract prices surge

Grainfed beef processors have started offering forward contracts on 100-day cattle for May delivery, with one source quoting 640c/kg on generic ox, and 650c on MSA cattle this week.

That’s a sharp rise on February forward contracts issued last year around October/November (when conditions were still very dry) of 570-580c. That’s a 60c/kg advance, worth around $220 on a typical 360kg grainfed carcase.

Anecdotally, many large Queensland and NSW lotfeeders had a few more empty pens around them during December, once the panic started to subside around prospects of another extended drought spell. Two months earlier in October, pen space was evidently in very short supply. More evidence of that should come forward in the December quarter feedlot survey results, due out in a couple of weeks’ time.

Some grainfed supply chain stakeholders told Beef Central this morning that forward contract price rises had to happen, given the sharp rises seen in feeder steer values since the rain impact has taken full effect.

“With what feeders are making today, a forward contract for May at 640c is still probably not enough to excite a lot of interest,” one grainfed supply chain manager said.

“The sums still don’t work at those prices, especially with grain prices as high as they are.”

“But even if it stays wet for another couple of months, once we see some drier conditions, there’s going to be plenty of cattle on the move.”

Is emerging US beef supply shortage a factor?

Significantly, none of the grainfed supply chain stakeholders spoken to for this report think the current lift in forward contracts and feeder steer values has anything to do with beef supply limitation issues in the US later this year.

US weekly beef kills have started to decline this year following the effects of drought, but not to the extent that many anticipated.

By mid-year, however, some stakeholders anticipate that the US will start to run short of domestic beef, potentially motivating interest in Australian grainfed.

“It’s obviously something that many Australian grainfed beef supply chains are thinking about, but I don’t think there’s any suggestion yet that the US situation is having any influence on Australian fed cattle and feeder cattle pricing,” the supply chain contact said.

“When does it actually happen? It’s been talked-about since the middle of last year, but its taking a lot longer to have an impact than what many anticipated. The truth is, nobody knows.”

“For the timebeing, everybody I’m speaking to in export meat sales says it’s still bloody hard-going trying to sell Australian export meat,” he said.

Grass versus grain?

There’s a theory emerging this month that a lot more young cattle that may otherwise have been destined for a feedlot pen this year will now spend the rest of their lives on grass.

“Some people will look at the margins on custom feeding in coming months, and given that many now have a sea of green feed in front of them, decide to grow those steers out to grass export ox weights – at considerably less cost,” one contact said.

“Feeders have become increasingly hard to buy so far this year, for that exact reason,” he said.

“Breeders who are sitting on young cattle today worth 350c/kg in the current market as feeders, all of a sudden have 400c/kg in their head.”

“I do think there’s a bit of silliness in the market at present – but that’s a symptom of the rain that’s fallen, the forecast for even more, the shape of the season, and the fact that many lotfeeders are still sitting on the beach at Mooloolaba. It’s the time of year, and will take a few weeks yet to really sort itself out.”

Spot grainfeds hitting the market

As described in this morning’s separate week kill report, there’s been a run of spot 100-day grainfed cattle hitting the market over the past week. One processor said he had been picking up runs of 300-400 spot-market fed steers ‘here and there’.

The most plausible explanation for that is lotfeeders late last year electing not to take forward contracts (at that time worth around 570-580c/kg for February delivery), and taking a punt on feeding them without a price attached.

While the result could have worked out very differently if seasonal conditions had stayed dry, for those who took the risk, the outcome has been strongly positive. Spot 100-day grain cattle today in Queensland are making 610-620c, representing a $150/head advantage on a typical grainfed steer over what he would have made under a February forward delivery contract.

 

 

 

 

 

 

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