Recent data reveals a notable shift in the dynamics of Australia’s feedlot industry. Here are the key insights:
Feeder Cattle and Grain Prices
Historically, feeder cattle and feed grain prices have shown an inverse relationship. This means when one rises, the other typically falls. This relationship is influenced by two primary factors: weather conditions and their impact on grain harvests and cattle turnoff, and the interplay between the two largest cost inputs for feedlots – grain and cattle prices. Currently, the national feeder steer price stands at 250¢/kg liveweight (lwt), while the Darling Downs feed wheat price is at $465/metric tonne (mt).
Recent Trends
Between 2020 and 2022, feeder steer prices remained high relative to feed grain prices. This was due to a restricted cattle supply during the cattle herd rebuild and increased demand from restockers. However, 2023 has seen a reversal in these dynamics. Feeder steer prices have dropped by 31%, while feed wheat prices have surged by 16%. This change is attributed to the maturation of the national herd rebuild, increased cattle supply, and a poor harvest outlook in certain regions, leading to a rise in domestic grain prices.
Impact on Feedlot Behavior
The average duration cattle were kept on feed was generally high between 2020 and 2022, as inducing weight gain through feeding was often more cost-effective than purchasing additional cattle. However, with the recent shifts in prices, this trend is changing. Shorter feeding programs are becoming more attractive due to their superior cost of gain. As a result, it’s anticipated that feedlot turnoff will increase in 2023, while the average days on feed will decrease.
Tim Jackson, MLA Global Supply Analyst, provided these insights, emphasising the evolving landscape of the feedlot industry and its potential implications.
