Cheap grain but finishing opportunities limited

Both grain and livestock industry leaders agree the concept of value-adding through lot-feeding has merit, but say the current value structure means it is likely to be only a niche opportunity for both the lamb and cattle sectors this year.

“The cost of store livestock is still the major component of a lot-feeding operation and prices for store cattle and sheep remain very high,” said Australian Lot Feeders Association (ALFA) president Tess Herbert.

“The current situation, with low grain prices, is an interesting dynamic and people are talking about opportunities, but from our industry’s perspective, cheap store livestock and good processing prices are a better thing than cheap grain,” she said.

Geoff Duddy, owner of Sheep Solutions, said crunching the numbers showed feedlotting Merino wether lambs could pay off, but it required a lamb cost price cheaper than current store values and extremely low grain prices.

He said a case could be made for lot feeding when the price of a store lamb was $100 a head or less, returns from the processor were over 535 cents a kilogram carcase weight and cereal grain inputs were below $120 a tonne.

Currently, lamb carcase weight values are in excess of 600c/kg, but store lamb values are higher and grain prices often slightly above the break-even figure.

Ms Herbert said the most likely people to opportunity feedlot would be broadacre cattle and lamb producers finishing their own livestock in an intensive feeding environment.

“It will be done, it may just be on a local scale and something we don’t hear about much at an industry level.”

“We’re unlikely to see people setting up new enterprises on the back of the cheap grain but those that have had success with opportunity lot-feeding before may have another go this season.”

However, she said in general people would find the numbers did not quite stack up or that there was insufficient time to generate a return before other farm priorities.

In northern areas, especially southern Queensland, a key lot-feeding region, Ms Herbert said emerging concerns with dry conditions may stop people from embarking on a finishing program.

Ron Storey, NZX Agribusiness Australia chief, said value adding grain by lot-feeding lambs or cattle was a ‘nice thought’ but said the reality was that it was a difficult, time consuming enterprise with relatively skinny margins.

“It’s a nice thing to think about, but it is a pretty specialised activity.”

“Those farmers who have grain stored on-farm have had a lengthy, late harvest program and there just might not be the time to get a finishing enterprise set up.”

Birchip Cropping Group (BCG) livestock systems officer Ali Frischke said farmers considering the option needed to do their numbers carefully.

“You have to know your costs of production, you have to know your growth rates and the feed conversion it is not just as simple as ‘I have some grain in the shed, let’s feed it out to some lambs’, you have to know the economics of what you are doing.”

She said mixed grain and livestock farmers had experienced success with opportunity feed-lotting before, but added many utilised their stubbles , primarily to finish lambs.

“Many might find getting their lambs on the stubbles an easier way of value-adding their livestock.”

She also urged farmers not to undervalue their own labour costs.

“You need to value your time and given many croppers will already be thinking about this year’s plant lot-feeding may be an idea that sounds good in theory but does not quite stack up.”

She agreed with Ms Herbert that a lack of cheap store cattle and sheep was a key obstacle for would-be lot-feeders who do not already have animals.

“In others years people with cheap grain have managed to source sheep from other areas, such as Western Australia, where there were issues with dry conditions, this year there is nowhere to source those sheep.

“Overall WA is in good condition and the pastoral country on the east coast, another potential source of sheep, is also going well.”

Mr Duddy said the high wool price was another roadblock to lot feeding sheep as Merino wethers, traditionally a low-cost option for opportunity lot-feeders were harder to come by.

“The high wool price is encouraging graziers to hang onto their Merino wether lambs for wool, whereas previously they have been part of the slaughter.”

It all added up to an environment where good management was critical in his eyes.

“Many producers can successfully finish merino lambs in feedlot systems however risks are generally high and margin for error low,” he said.