Cattle numbers on feed falling but 'new norm' to set in

Cattle numbers on feed falling but 'new norm' to set in

Beef
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Lift in store cattle prices, uncertainty in global markets put pressure on feedlots

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INTENSE competition for a shrinking pool of young cattle, combined with uncertainty around grainfed beef demand on the back of food service shutdowns around the world, is putting the squeeze on lotfeeders.

Market dynamics have shifted significantly from what was at play last year when feedlot occupancy levels were at record highs. As such, cattle placements are falling.

However, industry leaders and analysts believe the new base level is still likely to be close to the million head on feed.

Cattle on feed finished the December quarter at 1,239,563 head.

Australian Lot Feeders' Association president Bryce Camm said historically, the sector had experienced a 20 per cent reduction when faced with a major shock event such as drought breaking conditions, or a disease outbreak or exceptionally high grain prices.

"Numbers on feed, however, are higher than we've ever seen before," he said.

"We are continually seeing a larger percentage of the Australian herd going through the grainfed system on the back of the ability it affords value chains to consistently supply and producers to manage grass pastures.

"Growth in Wagyu is another element keeping numbers higher.

"So it will be interesting to see just where things settle."

As has long been expected post substantial rain across the Eastern Seaboard, restockers are competing with vigour in the store market and the pricing dynamic for the grainfed sector has shifted significantly.

The national herd is now sitting at historical low levels and projections are for further tightening of supply through winter.

Further to that, following a drop earlier this year, grain prices have flattened but are still at historic highs and are starting to creep back up.

At the same time, downward pressure on grainfed prices is flowing through due to the massive hit the restaurant trade has taken in pandemic lockdown.

Mr Camm said finished prices, however, were not back as much as might have been expected - it had surprised many the amount of strength that had so far held in grid prices.

"There is still a strong demand story for high quality Australian beef and the feedlot sector remains very active in supplying long-established customers around the globe," he said.

Beef production forecasts

The expected easing in numbers on feed would limit the upside potential for average carcase weight gains, according to Meat & Livestock Australia's April cattle projections.

Senior MLA analyst Adam Cheetham said improved conditions had contributed to an increase in average weights and while a decline in the national kill in 2020 was expected, and a knock-on decline in production, those improved caracas weights would serve to offset.

Fewer females making up the kill was also buffering the carcase weights, he said.

ALSO SEE: Cattle producers walk rebuild tightrope

MLA forecasts national adult carcase weights to lift 10.4 kilograms to average 294kg/head in 2020.

Looking ahead, restocker pressure and the impact of COVID-19 on foodservice demand, in particular longfed programs, would continue to pressure feedlot inventory numbers, according to MLA.

BeefEx postponed

NO COVID-19 outbreaks have been recorded on feedlot premises to date.

Mr Camm said the sector had responded well to social distancing measures, as had the whole red meat supply chain to ensure the continuation of red meat supply in this moment of challenge.

The economic downturn also had not hit expansion plans for the most part, he said.

"There is a large cost of capital involved in developing feedlot infrastructure and operators continue to show faith in the longer term with expansion plans," Mr Camm said.

The sector's premier event BeefEx 2020, however, has been postponed until October 2021.

"ALFA and its events committee put an immense effort into organising the pinnacle grain fed beef event, BeefEx. Our decision to postpone was a hard one but necessary in the current circumstances," Mr Camm said.

"ALFA remains dedicated to supporting our feedlot community with events and training opportunities. While face to face events are not possible currently, we look forward to relaunching our events program once government restrictions are lifted."

Despite the BeefEx postponement, the association also announced that the ALFA Recognition of Excellence Program will be continuing through 2020, albeit in a modified format.

"While the current situation has been challenging for the nation and our citizens it is important to recognise that our feedlot community continues to operate and produce high quality grain fed beef for consumers at home and around the world," Mr Camm said.

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