Feedlot utilisation levels set for a volatile 2019

Feedlot utilisation levels set for a volatile 2019


Commercial
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Mecardo reports that annual average processor margins remain on track to complete 2018 at around $100 per head.

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HISTORICAL movement in feedlot capacity and utilisation levels demonstrate that capacity increases do not always result in high utilisation of the existing feedlot infrastructure (Figure 1).

While the past two quarters have seen an increase in the number of cattle on feed to consecutive record-breaking numbers, it was not a sign of greater profitability.

Utilisation for the past two years has remained volatile but relatively high, between 75-86 per cent utilisation nationally.

The past quarter has seen its fair share of struggles in the feedlot industry.

FIGURE 1: Feedlot capacity and utilisation levels. Utilisation numbers are used as an indicator of feedlot performance and are the preferred index relative to total numbers of cattle on feed, traditionally highlighted as a performance indicator.

FIGURE 1: Feedlot capacity and utilisation levels. Utilisation numbers are used as an indicator of feedlot performance and are the preferred index relative to total numbers of cattle on feed, traditionally highlighted as a performance indicator.

High grain prices, a poor harvest with limited roughage availability and fires in southern Queensland will all place significant difficulties on the feedlot margins going forward into this quarter.

Accounting for these recent developments, combined with weather forecasts, currency outlooks and emerging saleyard trends, feedlot utilisation levels are likely to fall to their lowest point since September 2016 to around 72pc.

Capacity changes are expected to have little to no impact on this forecast, with growth last quarter changing less than 1pc nationally.

What does it mean?

The prospect of lower levels of feedlot utilisation, toward levels that we have not seen for a while, could reduce the demand for feed grain and other feedlot inputs going forward. Feedlot marketing’s of grain-fed cattle would then likely follow the utilisation drop in early 2019.

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