$42 loss forecast in September grainfed trading budget
Jon Condon, BEEF Central (Australia)
September 16, 2019
A SMALL downwards adjustment in 100-day grainfed cattle prices has taken the edge off profitability in Beef Central’s September monthly grainfed trading budget, calculated on Friday.
Representative processor offers for 100-day grainfed forward contract cattle slipped 5c/kg last week, to 605c/kg for a typical flatback grainfed export steer.
That’s contributed to a $42 loss calculated in Beef Central’s latest monthly grainfed trading budget exercise, calculated on Friday – $17/head worse than last month. While a little worse than last month, today’s result is still considerably better than numbers seen for much of the past four years, and as described below, higher-performing ADG cattle remain in profit.
Most other variables were little changed from our previous trading budget calculated towards the end of August.
The small decline in forward contact slaughter price comes off record-highs seen last month, when contacts reached 610c/kg.
Today’s monthly trading budget projection uses our standard set of variables (see full list at base of page) based on a typical 450kg flatback feeder steer entering a Darling Downs feedlot on Friday and closing-out after 105 days on feed on 26 December.
Beef Central wrote about signs of export grainfed market softening in this article last week. Two factors may be in play. The first is the customary annual brief dip in demand around now for feeder cattle that would exit their 105-day feeding programs around the end of December, when many export beef plants are closed.
The second is a dramatic decline in US cattle futures values that has occurred over the past month, following the fire in a major US beef processing plant. Some export processors harbour fears that this has driven a competitive wedge between Australian and US grainfed product in key markets like Korea and Japan, estimated in one calculation to be worth more than $300/head, based on recent futures trends (see story).
The counter-argument to that is that Australian grainfed export beef has been ‘lacking competitiveness’ against similar US product for the past six months, but that did not stop a gradual progression in slaughter cattle price offers from export processors. The general view is that processor margin is still reasonably strong on grainfed cattle, due to competitive pressure led mostly by China – albeit recently a little more subdued due to the tariff adjustment on Australian beef (see separate story).
Some see the latest grainfed slaughter price adjustment as a processor ‘experiment’ to see what impact a small reduction has on the flow of grainfed cattle – so critical during the current drought-driven quality slaughter cattle cycle.
Feeders steady at 300c/kg ...
Ration price unchanged at $460/t ...
Forward contract slaughter price eases to 605c/kg ...
Forward contract cattle bought earlier ...