Lotfeeding results look more promising

Jon Condon, 01/09/2011


The gradual recovery towards profitability in grainfed cattle continues, with Beef Central’s latest breakeven calculation performed yesterday  showing a negative $25 result on 100-day cattle placed on feed yesterday and closing-out mid-December.

Although still in the red, that’s the best result seen since mid-April, and marks a gradual recovery in feeding dynamics since they hit close to negative $90 a head during late May.    

Beef Central’s previous feedlot breakeven calculated a fortnight ago suggested a figure of negative $37 on 100-day cattle. The one before that in late July was negative $46.

Results have continued to improve primarily on the basis of improved forward prices for grainfed export cattle.

An analysis based on yesterday’s spot market for inputs suggested a breakeven figure of 377c/kg, dressed weight, for 100-day grainfed steers ex-Darling Downs, going on feed today and closing-out on December 15. That’s up 6c from 371c in Beef Central’s similar analysis done a fortnight ago – around a 1.5pc increase in cost of production, primarily due to increase in feeder cattle prices.

There’s been a 5c rise in feeder steer buy prices since last time, now pegged at 185c. That lift is due mainly to widespread eastern states rainfall over the past two weeks, and renewed restocker demand.

The trend is clearly evident in the Queensland Cattle Market Index and Eastern Young Cattle Indicators, which have both moved sharply upwards since mid-August. The QCMI yesterday reached 197c, up 8c after Dalby sale.

Finished ration price remained the same as the last calculation to $260t.

Total production cost was calculated at $1330, a 1.8pc rise from $1307 last time. That includes flatback feeder steer purchase plus typical feeding program, and a 1pc mortality rate in the yard.

Also influencing the outcome is the over-the-hooks forward market price for mid-December, which has been raised from 360c/kg to 370c. That rise appears to be more season and cattle supply driven, rather than A$ driven, but is still short the high 370s seen in breakeven calculations made in early June. It may also be reflecting the traditional improvement seen in the market through the back half of the year, as finished cattle become harder to find.

There was a big spread in the spot market quotes for 100-day grainfed ox among major southeast Queensland processors yesterday, with numbers running anywhere from 340c/kg to 370c, up an average 10c from our last breakeven performed in mid-August.

That’s due mostly to a slow return to higher processing throughput after a period of very low kills, caused by an excess of meat in the supply chain and flat international demand driven by the A$ and global financial fears. The shortage of ‘un-contracted’ 100-day cattle in the market may be another reason.

Choosing a mid-point in current rates means yesterday’s proposition for close-out in 100 days’ time is still about 15c/kg dressed weight below breakeven, worth about negative $25 a head, still a way to go to achieve profit.

Yesterday’s NLRS Eastern Young Cattle Indicator closed at 397.5c, up 7.5c on a week earlier.

  • • Beef Central's regular 100-day grainfed breakeven scenario is based on a representative standard set of production variables, ex Darling Downs. They include a 356kg dressed weight, average daily gain of 2kg, and a feed conversion ratio of 7.5:1 (as fed). It is important to note, however, that variations can exist across production models (feed conversion, daily gain, mortality, morbidity, carcase specification); from feedlot to feedlot; and between mobs of cattle. For a more specific performance forecast on a given mob of cattle, contact your preferred custom feeder.


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