Aided by excellent quality cattle offering in the North East, and the Western District, returns to producers has been solid at this year’s weaner calf sales. But what does this price benchmark indicate for processors and producers this year?
In the end, it all comes down to the weather. With the northern drought elevating turn-off, adult cattle slaughter finished 2018 close to 7.8 million head – up 9 per cent year-on-year.
As a consequence, securing supply when an autumn break does arrive will lead to intense market competition.
Widespread rainfall will see cattle prices rise, and stay that way for several years – similar to what we are seeing in the sheep industry.
Like producers, processors have been spending good money throughout the weaner calf sales, which they will need to get back at the point of slaughter.
Across all annual calf sales, processors and feedlot buyers have been securing heifers from 265 to 290 cents a kilogram live weight.
At Pakenham’s calf sale on Thursday, the solid price continued, and revealed a price ceiling for processors.
Majority of the sold equal to 320 to 350c/kg lwt, which was too dear for processors and feedlots.
Rodwell’s manager, Anthony Delaney, said the market was equal to, “or better than” any of the recent weaner sales.
More than half of the 2700 cattle penned were weaners, and featured 186 Charolais-Angus steers from Tarrawarra Abbey, Healesville, which sold to $1370 a head.
Alex Scott & Staff were the other major agent, and offered plenty of good quality calves. Bergamin Past Co, Willow Grove, sold 165 steers to $1066, to average about $1000/hd.
It is becoming more evident producers are using the marketing systems supplied by processors to avoid any of the great rises and falls in the market place.
The downturn in the size of the Australian herd has forced them to either buy, and grain feed their own cattle, or secure feedlots to a supply contract.
Over the past three years, this strength of the supply chain has changed the dynamics of both physical and store markets.
Export and domestic processors now have a supply guarantee, which is evident by registered feedlots being at full capacity, according to MLA’s latest feedlot report.
There were 1.126 million cattle on feed last quarter, but this does not include all of the opportunity feedlots.
Feedlots are playing a drought mitigation role but feedlot profitability is facing headwinds due to high grain costs.
Dairy Australia’s latest feed report shows price of cereal hay from $250 to $330 in South West Victoria, $350-$380 in the Goulburn and Murray Valley, and up to $400-$480 in Gippsland.
It is a similar story for grain, with wheat costing $405-$415 in the south west, compared to $460-$470 in Gippsland, while you’ll pay $345-$355 compared to $445-$450 for barley in the two regions.
And despite these record numbers of cattle on feed, it has failed to offset a decline in average adult carcase weight which has spurred producers to chase weight.
This week, the Eastern Young Cattle Indicator fell below 500c/kg, to hit 490.25c/kg carcase weight, a year-on-year fall of 65.75c/kg. Feeder prices are 271.4c/kg – a fall of 29.9c/kg in the same period.