CATTLE numbers in Australian feedlots are up more than 80,000 head compared with three months ago - the most positive sign in three years of a sustained industry recovery.
According to the most recent ALFA/MLA industry survey being released this week, numbers on feed rose to 791,000 head by June 30, up 11 per cent from the March quarter.
Queensland is the big driver in the resurgence, responsible for 67,000 head or 83pc of the national increase. This state's dominance in the current trend is probably being driven by two factors: the tightness of supply of feeder cattle in southern Australia, and the normal seasonal increase in feeding activity in Queensland over winter.
The June national result represents the largest numbers on feed figure seen in the industry since June 2007. The extent of the rise has surprised some analysts, given that it comes on top of the biggest grass-growing summer season in a decade, which some expected to curb interest in grainfeeding as a finishing option during 2010.
To put the latest result in context, however, it is still some way from pre-Global Economic Crisis and grain price-hike days, when feedlot numbers hit a record 908,000 head in December, 2006.
A break-even analysis on Queensland 100-day cattle carried out this week showed a break-even of 375c, against a current forward contract offer of 365c - a 10c/kg dressed weight loss, worth $30 to $40 per beast. That's based on a typical feeder steer intake price of 185c/kg liveweight and feed cost of $275/t.
MLA economist Tim McRae agreed that the current growth in feeding was supply rather than demand-driven, and probably reflected an expectation that grainfed cattle prices would rise later in the year.
While there had been a recent jump in feedgrain prices (some wheat and sorghum quotes have climbed 6pc in a week, on the strength of reports of a poor harvest in Russia and the Ukraine), there was still a level of assurance that feedgrain prices would remain 'pretty low and less volatile' throughout the remainder of the year - particularly in comparison with extreme high prices seen through 2007-08.
A decline in the value of the Aussie dollar in the last quarter has also been offered as a possible catalyst for growing numbers on feed. Another less obvious influence on the horizon is the extraordinary and prolonged decline in the US beef herd.
Data released by the US Department of Agriculture this week showed the US cattle herd continuing to shrink, despite already being the lowest in half a century.
USDA's mid-year inventory report showed total cattle and calves on July 1 was 1.8pc lower than a year earlier.
The mid-year snapshot will likely lead to an inventory total next January of 92 million head or slightly less, making this the smallest US cattle herd in 59 years, and down 2pc on a year earlier. The report also showed US cow-calf producers continued to reduce their herds rather than starting to rebuild them through heifer retention.
Declining cattle numbers is the most serious structural issue facing the US industry, analysts say, affecting livestock markets, dealers, feedlots and packing plants. All depend on numbers to maintain economic utilisation levels.
The USDA report revealed that cow-calf producers continue net liquidation of their herds even though calf and feeder cattle prices are much higher than last year. Most input costs remain high and there is considerable uncertainty about the future and aversion to risk.
Beef cow slaughter the first six months of 2010 was up 13pc on the same period last year. Despite this, cull cow prices are at record high levels and are probably encouraging producers to cull even more cows, US analysts say. One analyst said US beef end-users should prepare for higher prices later this year, because of declining US herd numbers, beef production and overall beef supply.
"Longer-term, a decline in the US herd has to be good for Australia, but that only applies if US consumers are back eating beef," MLA's Tim McRae said.
"Currently, there is no sign of the US increasing its beef inventory, because they are still wary of a double-dip recession, high unemployment, low consumer confidence and other issues."
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