By Angus Brown | Source: MLA, NLRS, Mecardo.
Over the hooks grainfed cattle prices have hit a 13 month high recently, as finished cattle supply remains tight. However, the increase in the finished cattle price is still not matching the costs of inputs, with lotfeeders still operating largely in the red.
The last month has seen the price of granifed cattle creeping higher at a time of year when it normally weakens. Traditionally spring sees the supply of finished cattle increase as cattle fattened in late winter and early spring come to the market.
It comes as no surprise to see that supply is simply not there this year, with drought limiting the number that could be finished on grass. Processors are having to increase the price of finished cattle to attract cattle and encourage further feeding.
Figure 1 shows that in the north, the 556¢/kg cwt reached for 100 day grainfed heavy steers in Queensland this week has the sell pricing edging above input costs.
In the south, feed grain prices above $420/t and still relatively expensive feeder values has input costs at an all-time high. After buying steers, and feeding for 100 days, our calculation has the breakeven cost in the south at $1,955 per head. For a 340 kg cwt steer, this comes in at 575¢/kg cwt.
There isn’t much difference in the grain prices in the north and south, but the cheaper feeder cattle up north means margins are better, at $52/head. In the south, our calculations have lotfeeders coping a $65 loss before overheads. After overheads, northern lotfeeders are likely running close to break-even, and southern counterparts running a large loss (Figure 3).
We can see in Figure 3 that lotfeeder margins haven’t ever been this bad, but they were close a number of times from 2009 to 2011. High grain prices persisted for two years last time and with it came low lotfeeder margins. Futures prices suggest grain prices might ease next harvest, but only back to the $330-360/t range.
Key points
* Grainfed cattle prices have reached a 13 month high as finished cattle supply remains tight.
* Higher grain prices and high feeder prices are seeing record lotfeeder input costs in southern areas.
* Lotfeeder margins are likely to be weak for the coming year.
What does this mean?
When we last looked at lotfeeder margins, we said that something had to move. Finished cattle prices have risen and margins improved in the north, but inputs prices have negated any rise in the south.
With cattle supply unlikely to improve and grain supply tight until at least next harvest, it might be some time before lotfeeders start making good margins again.
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