It’s not often we get two requests for similar articles at the same time. Last week a couple of subscribers asked about trading cattle in northern NSW and southern Queensland. Additionally, my learned colleague has called the low for the Eastern Young Cattle Indicator (EYCI) so surely there has never been a better time to buy. As always, it depends.
Figure 1 shows why current store cattle prices look like an opportunity. Restockers in EYCI saleyards north of Dubbo last week averaged just 364¢/kg cwt. At 54%, the northern restocker price equates to 196¢/kg lwt. This time last year the same cattle were making 324¢/kg lwt and the current price is less than half the October 2016 peak. By any measure, store cattle are cheap in the north.
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So what price can we expect out the other end? Whether it rains or not, feeder and finished cattle prices will be better than the price they are bought for. Finished cattle prices are going to have to remain strong to encourage supply, as will feeder prices. If it rains we expect all cattle prices to rise, although finished cattle will experience the smallest rise.
The raw trading numbers look good. Even at our worst-case feeder and heavy steer prices, cattle bought now will return $575 and $770 per head respectively.
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The lack of feed is obviously the reason store cattle have gotten so cheap. As such we need to look at the cost of feed to put weight on cattle. A lot depends on feed quality, but some rough numbers are 1.5 tonnes of good quality hay to put on 200kgs. More like 2.5t would be required to get cattle to 550kgs liveweight.
At $600 per tonne for hay, costs come in as per the feed costs in table 2. With the addition of feed costs, we can see why store cattle are as cheap as they are. If cattle have to gain all the required weight on supplementary feed, even at the best case prices there is either little money in it or a loss for heavy cattle.
Key points:
* Store cattle prices have become very cheap and have hit over 3-year lows.
* Trading margins are very strong, that’s if paddock feed is available.
* The cost of feed will wipe out any trading margin if rain doesn’t arrive.
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What does this mean?
Buying cattle with little paddock feed on hand is now, more than ever, a punt on rainfall. If you are lucky enough to have been under a storm and have some feed, buying and growing out cattle will be a good way to use it.
The bad news is that if it remains dry and feed expensive, there is the possibility of more downside for store cattle prices.
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