Markets

Wagyu feeders mount big price recovery, as demand surges

Jon Condon, October 1, 2020

THERE’S been a startling price recovery in Wagyu F1 feeders over the past few months, driven by acute shortage of supply and resurgent international demand for highly-marbled Wagyu beef.

Large Wagyu supply chains spoken to in recent days suggest well-bred F1 heavy feeder steers out of Angus dams are currently making 550-575c/kg liveweight – a rise of at least a dollar a kilo over this time last year. As recently as February (prior to rain, but before the onset of COVID), F1 feeder steers were making 450-460c/kg into Darling Downs yards.

Another report suggested mixed sex F1 feeders sold in NSW last week for 550-600c, while Fullblood feeder steers were making in the 680-700c range in the eastern states.

While the broader market for all young cattle has surged strongly this year following March rain, no segment has advanced at the rate that Wagyu feeders have.

Being heavily exposed to the hotel and restaurant food service sector, Wagyu export beef experienced a huge demand shock with the onset of COVID-19 control measures back in March. But international demand has since recovered dramatically, taking many by surprise, supply chains told Beef Central. One trader said based on the first few weeks after COVID, his business expected a ‘bloodbath’ in Wagyu beef demand like that seen in the Global Financial Crisis in 2008, but conditions had rapidly turned around.

While F1s are still only being thinly-traded on AuctionsPlus, AuctionsPlus sales in recent weeks have included weight categories where F1 Wagyu have again topped prices. It’s the first time that has happened since early 2018. Last week, AuctionsPlus’s 280-330kg steer category was topped by a line of 41 yearling Wagyu x Angus steers, 10-13 months averaging 298kg from Watershed Partnership Harden, NSW, sold for 567c/kg.

Recent price trends have again opened up a big premium for F1 Wagyu feeders over Angus steers, which trade sources suggest are currently worth 430-435c/kg in the paddock.

That suggests a premium of around 100-120c/kg for F1 calves over straightbred Angus at present – the highest seen since 2017-18. For long periods during the chronic oversupply of Wagyu feeders over the past 18 months, F1 feeders were worth no more, and at times even less than equivalent Angus steers.

The recent price moves illustrate the breathtaking supply/demand roller coaster that Wagyu has been on since 2017. F1 feeders were worth up to 700c/kg in 2017, before a glut in supply caused by a lot of opportunistic F1 breeding saw the market crash the following year and last year.

Now, since things have turned around, at least three large F1 grainfed supply chains are actively advertising their need for feeders.

While there was strong demand again evident for quality Wagyu beef in international markets in Asia, the Middle East and North America, that demand was still price-driven, one large supply chain manager told Beef Central this morning.

“Paying big money for feeders this week for animals that will not be processed for another 400-500 days always carries an element of risk,” he said.

Regardless of current price signals being sent to breeders, the current shortage of F1 feeders would be evident for at least 18 months to two years, several supply chain managers suggested.

Three factors appear to be in play in current low F1 supply, Beef Central was told:

  • Firstly, Angus breeders who may earlier have engaged in some F1 terminal breeding as part of their business are now focused primarily on re-building their Angus breeder numbers after drought – making an Angus bull a priority for heifer retention over a Wagyu bull, until breeder numbers are restored. “They may focus on building their base Angus herd again, before getting back into an F1 program,” one contact said. “Currently, rebuilding cow numbers is taking priority over outright price on calves.”
  • Secondly, Angus cow numbers have been reduced so far because of earlier drought (large numbers of PTIC females were sent to slaughter earlier this year and last year) that there are relatively few Angus cows left to devote to F1 programs.
  • Thirdly, while only anecdotal, some supply chains believe the collapse in breeder numbers after drought has prompted some breeders to retain F1 heifers in their breeding herd, even if it is against their broader management instincts. Normally those heifers would be sold as feeders, but spiralling prices for Angus breeder replacements may have influenced decisions to retain F1 heifers.

Like the rest of the cattle market, current prices for Wagyu F1 and Fullblood feeders was “too high, relative to what the meat is worth,” one supply chain contact said. “The feeder market is over-inflated, but whilever supply is as short as it is, it’s hard to see prices falling further,” he said.

Rain in Queensland would only tighten feeder supply further, he said.

One supply chain manager said there was currently a $400/head value spread between each marbling score for F1s at slaughter, with the breakeven figure currently around a marbling score of 5.

It means that supply chains with good databases on cattle performance were able to leverage that against more ‘generic’ F1 purchases.

Recent declines seen in feedgrain value and ration price (see earlier 100-day trading budget report) had helped the breakeven equation, but the length of the production cycle on longfed cattle made budgeting out beyond a year very difficult, one trade contact said.

Some Wagyu supply chains appear to be feeding more F2 and F3 cattle this year than they did previously, with some ‘specialist’ breeders now aiming to turn off F2 and F3 feeders, which typically attract another 10-20c/kg liveweight over F1s, Beef Central was told.

Equally, there are now more significant Fullblood and Purebred Wagyu herds in operation than ever before, based in a region stretching from Central Queensland to Central NSW. Some of these, at least, previously concentrated on F1 breeding, further reducing the current pool of available F1s.

One large southern Queensland feedyard told Beef Central that 30-35pc of its Wagyu placements this year were of Fullblood or purebred cattle. Currently that yard is paying “well into the 7’s,” and as high as 750c/kg for good examples.

“There’s no doubt that a lot of the corporates with exposure to Wagyu are growing the higher-content (Fullblood and purebred) end of their feedlot inventory, moving further away from the ‘commodity’ end,” one experienced Wagyu feeder said.

“The bigger operators are looking for more long-term, fixed, high quality programs, as opposed to short-term, high turnover programs. As feedlot numbers decline, the prospect of feeding more (or longer) Wagyu looks increasingly attractive, for pen occupancy reasons.”

 

 

 

 

 

 

 

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