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Thursday, December 03, 2015

A rosy September quarter for lotfeeders

By Angus Brown  |  Source: ALFA, MLA

Key points

  • Cattle on feed numbers largely steady, but both placements and marketings at record levels.
  • Queensland was the driver, with record numbers of cattle marketed, placed and on feed.
  • Rising numbers of cattle being placed on feed suggests lotfeeders achieved strong margins in the September quarter.

2015-12-03 ALFA Survey FIG 1

2015-12-03 ALFA Survey FIG 2

2015-12-03 ALFA Survey FIG 3

Australian lotfeeders look to have made good money in the September quarter despite record feeder cattle prices. This is indicated in the latest ALFA/MLA Cattle on Feed survey, which reported a small increase in cattle on feed, but record numbers for turnoff and placements.

Figure 1 shows that the Australian Cattle on Feed numbers have been remarkably steady over the last 12 months.  Usually we see seasonal fluctuations of up to 50,000 head, but only small changes have been recorded this year.  At the end of September, Cattle on Feed were up 0.5% to 961,328 head. This is about 3,800 head below the record set last December.

Interestingly, the ALFA press release that came with the survey numbers failed to point out a few key figures, which indicate that feedlots might be doing ok.

Cattle on feed in Queensland reached a new record at the end of September, increasing by 9% to 575,242 head and 6% above the record set last year.  This was driven by record placements of cattle on feed in Queensland, which increased 42% on last quarter and 25% on last year.

Record Queensland placements led to record national placements, which were up 22% on last quarter (figure 2) and 10% on last year.  The record placements of cattle on feed was despite rapidly rising feeder cattle prices in the September quarter, and suggests rising prices were driven by demand and improving lotfeeder margins.

Obviously, for cattle on feed to remain steady while placements were at a record, it means we had to see record grainfed cattle marketings as well.  Grainfed cattle marketings were 14% higher than the June quarter, and 21% higher than the September-15 quarter.

Again it was Queensland driving marketings: up 36.5% on last quarter, and 33.4% above the September-14 quarter.  It is quite extraordinary for Queensland to have record turnoff from feedlots, but actually have more come in to replace them and a 9% increase in the numbers of cattle on feed (figure 3).

The large increases in Queensland were offset to a degree by seasonal declines in all of the other states, where fewer cattle are fed in September as grassfed finished cattle turnoff increases.

Read our previous article on feedlot margin article – Feeder cattle upside looks likely

What does this mean?

Strong buying by feedlots in the September quarter suggests there was still plenty of money to be made in feeding cattle, despite rising feeder cattle prices.  This was shown in our feedlot margin article (see link above).

With tightening cattle supply in the last month, feeder cattle prices have returned to very strong levels, indicating that lotfeeders are still looking for cattle and that margins remain relatively good.

While the grainfed cattle price remains strong, feeder cattle prices should also maintain their lofty levels. This big risk, however, to this market is falling Japanese beef export prices, while a good wet season in Queensland could see further upside.

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 


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