News

‘Horrific’ losses being racked-up on grainfed slaughter cattle

Jon Condon, 15/03/2023

SOME truly eye-watering losses are being reported on grainfed cattle being slaughtered this month, reflecting the extremely high prices paid for feeder cattle towards the end of last year.

Grainfed supply chain managers say the losses are record-high for the Australian industry, with many grainfed descriptions $350-$500 in the red, and some as much as $1000 a head, on cattle bought as feeders, fed, and sold. In fact one contact insisted that some grainfed losses went deeper into four figures, but he did not want to elaborate. That may simply be pub talk, but it’s hard to tell.

“The situation is as bad as we have ever seen it,” one veteran grainfed lotfeeder/processor said. “There’s red ink everywhere.”

“The re-alignment of prices has been pretty severe,” another supply chain manager said.

The primary reason is the extreme high prices paid for feeder cattle in the back half of last year, combined with the dramatic slide in grainfed finished steer value this year, as those cattle reached the end of their feeding cycle.

At the same time, feedgrain prices offered no relief, having strengthened further early this year. Prices quoted in yesterday’s weekly feedgrain report were $410/t for SFW wheat ex Downs, and $418 Melbourne.

Feeders that were bought last year at up to 650c/kg on blacks and +600c for flatbacks were exiting the feedlot in recent months costing well above $10/kg carcase weight, and selling into grainfed markets at 700c/kg or less, representing losses in some examples of $2.50 to $3/kg, Beef Central was told.

The current spot market slaughter price for grain finished 100-day steer is 625-650c/kg, back at least 100-125c/kg on October rates around 750c. One large Queensland export processor has withdrawn its offers on spot (uncommitted) grainfed altogether in recent weeks, because of the losses involved.

“There’s finished cattle today selling at around 650c/kg, that probably needed 775c/kg to break even – given their purchase price as feeders last year,” a Queensland supply chain contact told Beef Central. “At 125c/kg, that represents a loss on a 380kg carcase of $475. And there’s a lot worse cases around than that,” he said.

“The problem was that the feeder market should have come back a lot quicker than it did, as the meat market started to slide. But that didn’t happen, because of scarcity. If the supply of feeders last year had been larger, those prices would have come back way quicker. The extreme prices paid by the supermarkets was partly to blame for that.”

Midfed Angus hard-hit, Wagyu yet to weather the storm

Some of the biggest losses were being reported this week on mid-fed Angus types 150-180-days on grain – partly because their purchase as feeders happened even earlier in the price cycle. Angus feeders for periods last year were worth up to a dollar a kilo more than generic flatbacks due to supply, or about $400 a head.

For Wagyu supply chains, the length of time on feed meant that they still had their period of intense price pain because of extreme feeder prices in front of them, one Queensland supply chain manager said.

The fact that grainfed processors did not commit to as many forward-priced cattle at the end of last year also meant that some feedyards had been left with more uncommitted cattle than they would normally like to have. Those cattle were being particularly harshly treated.

While the owners of cattle on feed are currently doing it very tough, it’s important to recognise that those producers who went into the market last year to buy weaners as stratospheric prices, to background for feedlot entry weights, were also suffering big losses at present as the feeder market has fallen away. Some of those black weaners bought earlier at +700c/kg liveweight were now selling into the feedlots at 380-390c/kg liveweight, with plenty of losses as much as $500 a head being reported.

When does the bleeding stop?

Some grainfed supply chains anticipate the bleeding won’t ease until June-July this year, by which time feedyards will have worked their way through the ‘really expensive’ cattle bought at the peak of the cycle last year. Cattle entering feedyards now are being bought at much cheaper rates, with the NLRS feeder steer indicator currently sitting around 380c/kg live.

“We are working through the dearest (bought) cattle now,” one grainfed processor said yesterday. “We are probably around the peak of the cycle. There were some very expensive feeder cattle much earlier last year, but the meat market and finished cattle prices back then was still much higher – that’s the difference.”

Some see the eventual turnaround in the US grainfed beef production and price cycle as offering some relief to the current situation, on top of cheaper feeders.

A substantial wind-back in US beef production, anticipated around mid-year, should add some momentum on the sell side for Australian grainfed beef in international markets, some believe.

 

Click here to access Beef Central’s unfolding Top 25 Lotfeeders report, including profiles and statistical table

 

 

 

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Comments

  1. Paul Bradley, 20/03/2023

    I personally am fortunate in that I breed my own cattle and have not had to take losses that those who purchased cattle last year have taken . However it is extremely irritating to see that the supermarkets and butchers have not lowered their prices at all . It is a blatant greed grab . The issue of inflation that many have used to justify the greed grab does not stack up . The oil shock , the extreme weather conditions in many areas and low wage growth no longer should have any bearing on saleyard or abbatoir prices.
    I was receiving $4.20 live weight for 630kg Friesian steers last October now the same animals are lucky to get $2.80 at Shepparton livestock market where I then lose 10% in selling costs .
    I now send any animals to the abbatoirs direct as at least I know in advance what I will get rather than chance the markets and hear market reports saying full field of buyers but not all active at times throughout the sale

  2. Joshua baker, 18/03/2023

    Needing a peer pressure surge toward prices to be adjusted all at once in everything, we’d better figure the ideal prices at all sectures, good for me good for you approach, the outcome of the procedures would benefit in the short to long run, more co-op to the challenges, needing more skill to move prices for others than just sell at a jamming situation…

  3. Greg Varnado, 16/03/2023

    Ok loses on top huge discounts on the bottom.
    Consumers have been paying tremendous prices at the counter. So, chicken and pork instead of beef. We have seen this cycle many times, the cycles in the market are picking up speed, it seems. Everyone is happy when huge profits roll in!

  4. Frank Reyes, 16/03/2023

    Thanks for the article and for the opportunity to comment.
    The article ends with forecast of probable lower international beef offer around mid year. That certainly could push prices up, and more so if the events described in the article take a toll in local production (which I think probbably will).
    My question is, if posible, what forecast can you suggest regarding international demand for that time frame?
    Thanks again!

  5. Russell Jones, 16/03/2023

    Profit is not about comparing the amount cattle cost to buy and the amount received when they are sold.
    Its all about comparing the amount of money received for finished cattle now to the cost of replacing those cattle now.
    Sell finished bullock for $6.50 dressed.
    Buy back in at $3.80 live weight.
    There is still a profit.

    Thanks for your comment, Russell. We understand the sell-buy profit approach you have illustrated, but even using it, it still does not result in a cash margin – which is what pays the bills. We think the sell-buy profit approach works better on grass production where there is a nominal cash cost per KG of gain, as compared to feedlots where production costs comes at $6.00 plus, cost per day. And the sell-buy approach can make matters look considerably worse, when the market is on the way up. We’re convinced that buy-sell is the most widely used and understood approach. Editor

  6. Michael Loss, 16/03/2023

    This past year I have gone into the red having to sell cattle as low as $150.00 each for mature angus heifers, mixed breed bull calves and various other brands. I am nothing more than a small ranch owner facing foreclosure, and repossession of vehicles due to cattle feed prices. I only have a few left and have struggles to feed them. The political wolves of this country have drained us dry. I have more than several thousand over the price of what my cattle would sell for just in feed and hay. Rolls of hay when you can find them are as much as $100.00 bucks a roll at Tractor Supply and local co-op ag sales! $400. Plus a ton for feed that may last a little more than a week. And my cattle are still thin. This left wing political group has crushed the little man, ranchers and farmers alike! I am proud to add that I did not vote in any of these political subjects that have decimated The American farmer and rancher. Simple corn, a 50lb bag has been more than $14.00. This does not account for the health care side of the animals. Where does it end?

    Editor’s note: It’s evident from the IP address that this reader is based in the US, where the production/drought cycle is completely different from Australia’s.

  7. David Hancock, 16/03/2023

    Do you have a dealer in Mt Gambier South Australia.

  8. Michael R Hahn, 16/03/2023

    As a producer decent but not exceptional prices for some Beefmaster and Beefmaster to Brahman crossbreed yearlings.

  9. Richard Oldfield, 15/03/2023

    FEEDLOTS & TRADERS FAIL TO TELL HOW MUCH MONEY THEY MADE WHEN BUYING CATTLE AT A MUCH CHEAPER RATE & SELLING THEM ON A LOT HIGHER PRICE WHEN THINGS WERE ON THE RISE.
    AS SMALL PRODUCER I MADE MY CONCERNES CLEAR THAT THE QUICKER THINGS RISE THE QUICKER THEY FALL & WAS TOLD BY MANY THERE WILL BE A CORRECTION BUT WON’T BE ANYTHING TO HURT ANYONE HAHAHA, TELL THAT TO ALL THE PEOPLE THAT INVESTED IN PROPERTIES, STOCK & INFASTRUCTER PLUS INTEREST RATES, PLUS THE GREEN LABOUR GOV., GOT PLENTY MORE PAIN TO INFLICT ON EVERY ONE YET.

    A polite reminder to all readers offering comments on Beef Central’s articles. Use of full capitals is regarded as shouting. Upper and lower case in future please, otherwise comments will not be published, as per our long-standing reader comment policy Editor

    • W Marmont, 16/03/2023

      So true, very hard to get a balanced forward looking forecast particularly when the butchers control the local sales, as against local pasture feeders on smaller properties.

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