![Fewer numbers on feed Fewer numbers on feed](/images/transform/v1/crop/frm/38U3JBx5nNussShT8aZyYjc/f1e6d64c-3fd7-4699-ba8c-2c7a6d8aff39.jpg/r0_0_2051_1221_w1200_h678_fmax.jpg)
RELATIVELY weak grain prices and a lower Australian dollar worked to help offset phenomenally tight supply and record high cattle prices for lot feeders this year.
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Despite the meteoric rise in the cost of filling pens, numbers on feed held quite steady up until the September quarter, when the industry survey showed a 13 per cent drop from the June quarter to 788,873 head.
South Australia had the biggest percentage drop, back 42pc, while grainfed numbers in Queensland also declined by more than 50,000 head despite expansion plans at numerous facilities coming online – something that had been in place for some time.
Most of Australia’s 450-odd accredited beef cattle feedlots are in South East Queensland.
Meat and Livestock Australia’s domestic paddock feeder steer indicator averaged 368.89 cents per kilogram liveweight for the September quarter.
That number is up 24pc year-on-year and 19pc higher than the June quarter.
Similarly, the national saleyard feeder steer indicator averaged 375.68c/kg, up 20pc year-on-year.
Fervent restocker activity on the back of widespread rain across much of the eastern states during the September quarter drove prices of feeder cattle up, ultimately impacting numbers on feed.
The low grain prices continue, however, and are forecast to remain that way courtesy of high global supplies
Domestic grain prices for the September quarter were lower than 2015 levels, with wheat ex-Darling Downs back 28pc and barley easing 26pc, while Riverina wheat prices slipped 19pc year-on-year and barley 34pc.
Fodder prices followed a similar trend for the period.
And the Australian dollar continues to work in lot feeders’ favour.
MLA’s manager of market information Ben Thomas said while the dollar did gain strength in 2016, it was still significantly lower than what is was a few years ago.
“2011 and 2012 were particularly challenging for the feedlot industry because the Aussie dollar averaged 105 to 110 cents (to the US dollar),” he said.
There has also been some relief on cattle prices during the eight weeks post the September quarter survey results, with Eastern States feeder cattle indicators declining.
Australian Lot Feeders’ Association (ALFA) president Tess Herbert said it was difficult to see how such high cattle prices could possibly be sustained into the future.
She said the approach taken by feedlotters as the supply situation set in showed an acknowledgement of the strategic risks that face the industry at the moment.
The challenges are significant – emerging international competitors, current competitors gaining strength, increased access to Australia’s markets, declining domestic consumption of beef, climate change, regulatory risks and social licence to operate pressures – all on top of surging cattle prices.
Putting the year in perspective, Mr Thomas said numbers on feed were currently sitting around the five-year average, if 2015 and the first half of 2016 – unprecedented times in terms of numbers going to feedlots – were taken out of the equation.
Despite reporting tighter profit margins throughout the year, lot feeders held their own in saleyards against the intensity of grassed-up restockers.
Mid year, MLA reported they were consistently accounting for 44pc of Eastern Young Cattle Indicator cattle.
“That has come back a little but they still represent a solid proportion of EYCI purchases,” Mr Thomas said.
The typical, long term make-up around the saleyard rails has feeder buyers, restockers and processors each accounting for a third of trade.
“Feeder buyers did increase their slice in the first six months as processors took a step back but not to the magnitude re-stockers did,” Mr Thomas said.
“This year, re-stockers entered the market in force.”
In the September quarter, 39pc of the kill were grainfed, compared to the long term average of 32pc.
That was a typical pattern in rebuild versus liquidation phase, according to Mr Thomas.
Demand for the end product, meanwhile, has held relatively strong.
Year-to-date exports, despite the decline in the number of cattle on feed, are level pegging with where they were this time last year.
That was mostly on the back of extremely high volumes in first half of the year, Mr Thomas said.
“Expectations are we won’t be able to maintain volumes in final quarter,” he said.
“The forecast of around 800,000 head on feed in the final quarter (which compares to near one million at the end of 2015) means a lot less grainfed beef produced, so a slowdown in exports is inevitable.”
Ms Herbert – ALFA’s first ever female president – said despite the challenges, the lot feeding industry continued to demonstrate its resilience and strength through innovation and consistent extension.
In her report to the ALFA annual general meeting in October, Ms Herbert said free trade agreements had opened up further access for Australian beef and industry systems remained the strength underpinning Australia’s brand.
Some of the 2016/17 for ALFA focuses included training and leadership support to encourage the extension of people in the industry, investment in animal, health and welfare and biosecurity and research, development and extension to underpin ongoing improvement on feedlots while meeting consumer expectations for the production of grain fed beef, she said.
ALFA also appointed a new chief executive officer this year, Christian Mulders.