TL;DR: Feeder cattle prices face pressure from increased supply, limited demand, and falling forward contract prices, exacerbated by recent weather disruptions. Market activity has quieted, with current buying urgency affected by economic uncertainties and a noticeable gap between grain-fed and grass-fed beef prices, impacting profitability and demand dynamics in the industry.
Feeder cattle prices are facing a tough time this month. A mix of increased supply, limited demand, and falling forward contract prices for 100-day grain-fed cattle is to blame.
The weather hasn’t been helping either, with rain causing delivery issues for feedlots eager to restock. Despite this, many large feedlots had already secured enough feeder cattle before Easter, leading to a noticeable reduction in their market activity.
This trend is evident in sale yards, where the presence of lot feeders has dwindled since late March.
Forward contract prices for 100-day grain-fed ox with 0-2 teeth from Queensland are now ranging between 640-650c/kg for late July delivery. This is a significant drop from the May contracts, which were priced at 700c/kg just a few months ago. By now, July contracts have been mostly filled, reflecting a 60c/kg decrease over three months. This decline translates to about $220 less for a typical 350kg grain-fed steer carcass.
Getting quotes for heavy flatback feeders in the Darling Downs has been challenging, with many yards yet to re-enter the market post-Easter. Current prices are believed to be between 320c and 330c/kg.
Last week, some yards offered up to 340c/kg for immediate delivery, a figure inflated by the ‘rain money incentive’ due to delayed pre-committed cattle deliveries, according to one insider.
The recent rainfall may inject a sense of urgency back into the buying market, as each week without replenishing feeder stock adds pressure to feedlots.
Some of the larger multi-site feedlot operators have paused their quotes on paddock feeders, a silence that’s been noted since the second half of March.
“The market’s gone very quiet,” commented one grain-fed supply chain manager, pointing out the combination of Easter timing and other factors as possible reasons.
Despite earlier purchases at around 330-340c, today’s market appears slightly cheaper. “Everything’s pulled back,” observed another manager, noting the current surplus of suitable cattle compared to market demand.
The NLRS feeder steer saleyards indicator sits at 320.6c/kg, a figure reflecting modest saleyards activity over the past week.
Prices have declined from 357c/kg in early February to 303c/kg in mid-March, before making a moderate recovery. This is a stark contrast to last year’s prices, which were at least 40c/kg higher.
The industry is keenly watching to see if the recent surge in feeder supply will persist as conditions dry out after the rains.
Globally, economic uncertainties have led to cautious spending on beef, impacting grain-fed beef demand. Despite a rise in Australian beef production this quarter, grain-fed beef prices haven’t seen the same uptick as international beef trimmings markets.
Forward contracts might need to fall below 630c/kg to create a margin for grain-fed processing, especially when grass-fed steer prices hover around 530-540c/kg.
Feed grain prices have been dropping (see today’s report), but large yards with prior higher-priced grain purchases are still working through more expensive feed.
Reportedly, some Darling Downs feedlots have expanded in recent months, adding to the dynamics of feeder cattle pricing and demand.
