BUYER demand for mid-tier feedlot assets is looking flat in the near term as the sector regroups after a punishing half year brought on by dearer feeder cattle prices and prevailing strength in grain prices.
Tempering this is the appeal of the mixed farms that invariably surround feedlots, with two listings in New South Wales – Mirambee at Dubbo and Kia Ora at Walgett – and two in Western Australia – Kalimpa at Warradarge and WestBeef at Burakin – being cases in point.
All are licensed to hold around 5000 standard cattle units (SCU), and represent differing business propositions.
The Iker family’s 2507-hectare Vandyke Feedlot at Springsure in Central Queensland is a different proposition again; it is licenced to hold 8640SCU, and is tenanted by grainfed supply chain managers Allied Beef.
Vandyke was passed in on a vendor bid of $7.5 million, or $868/SCU, when it went to auction last month, and is for sale through Nutrien Harcourts Emerald.
SCU cost looks steady
Vandyke’s $7.5M fits into the long-held price range for efficient feedlots of $800-$1000/SCU, depending on quality of infrastructure, age and location.
“There’s a run on feedlots probably two years in every 10, and they’ve been trading in a very flat market for the past 18-24 months,” Herron Todd White national director agribusiness Tim Lane said.
Drought still grips pockets of eastern Australia, and Mr Lane said its impact has added water to the list of value determinants for feedlots.
“Because of the dry, water became the limiter in people’s ability to expand or maintain cattle numbers.
“People are a bit more circumspect about water reliability now.”
Mr Lane said drought boosted the need for SCUs as demand for custom feeding to finish cattle bolted on to demand from vertically integrated operations, and recent expansions by major operators have consolidated the feedlot sector’s capacity at current levels.
“We had a big run in feedlots a few years ago, and six sold in about 18 months.”
Recent sales started in 2015 with Bindaree Beef buying the Mulligan family’s Myola feedlot at North Star in northern NSW, and finished with the 15,000-head Sandalwood near Dalby on Queensland’s Darling Downs last year to Korean-based supermarket giant Lotte.
In the middle was Hancock Prospecting’s purchase of the Gunnee Feedlot near Inverell in northern NSW, and the 8000SCU Wagyu specialist Maydan near Warwick on the Darling Downs for $22M.
Glen Gowrie at Allora on the Darling Downs sold for $4.5M to Cliff Shelley, owner of the nearby Freestone feedlot, to add 2280SCU to his capacity.
Also, Smithfield Cattle Company bought Sapphire Feedlot near Goondiwindi for a rumoured $9.2M, with 6000SCU, and capacity to grow to 8700 head, or just over $1000/SCU.
Supplementing the sales were expansions on the Darling Downs, with the biggest being Mort & Co’s at Grassdale, Australian Country Choice’s at Opal Creek, and Stockyard’s at Kerwee.
“It’s hit its peak and filled up to what processors need, and drought management needs.”
“They’ve all shifted their cards in their deck, and there’s not a lot of overall demand left for feedlots.”
Drought in NSW and Queensland pushed record numbers of cattle on to feed last year, as pastures and grazier-held fodder evaporated, and grain, much of it from SA and WA, flowed across the borders and its feedmills.
Water has emerged as the limiting factor, and a shortage during the drought hit feedlots large and small from Tamworth to the Queensland border.
It caused some to cease or reduce custom feeding, and others to cart water for stock, or both.
Former Sandalwood principal Kevin Roberts said water’s value alone was enough to underpin the price of an SCU in well-developed feedlots.
“If someone wanted to go and find a greenfield site and then go through the process and the cost of getting a licence to secure water and lots of it, it’s quite possible that $800-$1000 is cheap,” Mr Roberts said.
Stock a factor
WA is the market to watch, and its limit to growth appears to have nothing to do with access to water or affordable grain.
“WA is different; over there, it’s the lack of supply of cattle that’s the limiter,” Mr Lane said.
Grain Central understands WA is seeing record applications for feedlotting operations, albeit from a small base, with Harvest Road’s 40,000-head feedlot at Yathroo heading up the list as a major step in vertical integration for Twiggy Forrest’s Harvey Beef.
Feeding of sheep in confinement pens has come into its own in eastern Australia’s drought, but the sector does not have the same degree of regulation as beef feedlots, and is therefore difficult to value.
While sheep feedlots have kept many operations in NSW, and some in Queensland and South Australia, afloat during the drought, the market for them has had trouble finding its feet.
Mr Lane said opportunity feeding of lamb or cattle was likely to hold its place when seasons dictated, and commodity prices allowed.
“Whether its lamb or cattle, if you can run a couple of hundred head through your own operation by adding water and grain, you’re able to add value.”
Vendors Maurice and Sharon Swain listed Kia Ora in 2016, and Mr Swain said they were looking for a change in lifestyle after drought featured in the past six of the past seven years.
The Swains have used Kia Ora’s feedlot and associated infrastructure to finish their own cattle bred on the 17,303-hectare property with Narran Lakes grazing and Barwon River frontage, as well as buy in stores.
Since January, the Swains have run down numbers to a bare minimum, but are now enjoying a fine season for cropping and pasture, as well as full dams and a flowing river.
“In January, it started to rain, and cattle prices went through the roof,” Mr Swain said.
“After harvest, it might be a better proposition if grain prices get cheap.”
Kia Ora has 5260ha of cropping country which has, seasons permitting, been used to grow barley and wheat for value-adding through the feedlot.
“We’ve had some cattle which we fed for 70 days for Woolworths, some on 100 days for Kilcoy, and some we were custom feeding.”
The spread has worked well for the Swains, even when they were buying grain coming into northern NSW by rail and road in 2017-19, when drought burnt up any grain grown in the northern half of NSW.
Kia Ora is calling for expressions of interest by 30 August through Moree Real Estate.
Another NSW feedlot, Mirambee, is 12km south-east of Dubbo, and listed last year with Ray White Rural NSW Dubbo.
Like Kia Ora, it has seen a remarkable turnaround in the season.
Mirambee covers 441ha, and comes with a 100-megalitre bore licence.
Its impressive improvements include a feedmill and 14 150-tonne silos.
Developments in WA
In WA, Harmony Agriculture and Food Co’s WestBeef feedlot has a 5000SCU capacity, with approval to build to 7500SCY, and 900ha of cropping land.
Located at Burakin on the fringe of WA’s wheatbelt, and adjoining pastoral country, WestBeef failed to sell on instruction from receivers following an EOI campaign by Colliers International which closed 16 April.
The feedlot is 250km north-east of Perth, and was bought in 2016 for $4.25 million as one of parent company Dalian Hesheng Holdings’ first Australian assets.
The facility covers 1030ha, including more than 900ha of farming country.
The first beast is yet to be inducted into Kalimpa Feedlot, being offered for sale through CBRE Perth with Erim Downs, a 1970ha mixed farm with a 300ML groundwater entitlement.