By Angus Brown | Source: MLA, Auctionsplus, Farmtender
We wrote our initial article on whether to feed, agist or sell back in May, with the conclusion that if it rained in the winter, feeding, or agisting would be the best option. Hindsight is a wonderful tool, and as it has panned out the smart money was on selling cattle and retaining feed. It’s time for an update.
Interestingly enough, cattle prices haven’t really changed since our May article, with the Eastern Young Cattle Indicator (EYCI) largely steady or even a bit higher (Figure 1). The Medium Cow Indicator has actually rallied quite strongly. Cow prices in east coast saleyards last week averaged 414¢/kg cwt, up 18% on May values.
It's feed prices which have moved strongly higher. Back in May, we used $220/t for good quality hay. Now hay will cost closer to $320/t delivered across most of NSW. However, there are freight subsidies now which will alleviate some of the cost.
Back in May feeding a heifer a maintenance ration of good quality hay was going to cost $1.21 per day. Since then $109 per head has been burned and the price of heifers is basically steady. Cutting losses and taking the $600-800 per head depending on weight is one option.
Feeding a heifer for a further 90 days gets cattle through to November when hopefully some rain has turned up. Either that or the new hay season may have produced some cheaper fodder. With hay at $320, the cost of feeding 5.5kgs per day will be $1.76 per day. Total cost for 90 days is $158/head.
Now the hard part. What are heifers, or breeding cows, going to be worth in November? They need to be worth roughly more than $900/head.
With a widespread break in the drought, expect the EYCI to go back to 650¢ based on current export prices and the 2016 premium (Figure 1). With a break in some areas 600¢. With continued dry 400¢.
Key points
* Feeding cattle since May has made a loss as rainfall has been minimal and feed is still required.
* The cost of feed has risen and maintenance rations are now costing around $1.76 per day.
* Again, rain will offer a good payoff from feeding, but the BOM forecast suggests selling now and buying back in November might be a good strategy.
What does this mean?
Under the three weather scenarios, 450 kg breeding heifers or young cows will be worth around $1220, $1130 or $756 per head. The rain scenarios obviously make feeding worthwhile (Figure 2), as the cost to restock will be more than the cost of feeding through. However, we did say that back in May and the Bureau of Meteorology three month outlook is not putting strong odds on widespread rain.
It’s a tough decision, given the liquidation of the herd all classes of cattle are going to be very expensive when it finally does rain. If it remains dry to November, it will be a gutsy move to restock before any rain, but we will have an idea on the probability of a northern wet season by then, which may assist with decision making.
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