AFTER 18 months in the doldrums, the grainfed beef sector may to be poised for steady but modest recovery this financial year, with analysts suggesting numbers on feed could grow to 700,000 head by December.
Attention will focus next week on June quarter results from the ALFA quarterly feedlot survey.
Anecdotal information suggests no clear trend is evident in feeding activity in Australian feedlots, with some larger operations near operating capacity, while others are still at 50 percent of capacity or less.
March quarter survey figures showing 650,000 head on feed continued a trend of subdued feeding activity since late 2007, and any increase in numbers for the June quarter just completed likely to be modest, analysts say.
Softer demand out of North Asia and shortage of feeder cattle, and the strong grass-finishing season in many areas were key limitations to a more vigorous lotfeeding resurgence. While feedgrain prices had declined further than expected this year, other factors had worked against a more significant recovery.
Darling Downs wheat last week was quoted at $250/t, down from $430 this time last year, while sorghum was down to $195/t from $268/t. Feeder cattle prices for steers 330-400kg were quoted at 177c/kg liveweight last week, almost identical to the same time last year.
But the finished cattle price, driven by very weak North Asian export demand, showed the major impact on feeding margin.
Australian 100-day fullsets into Japan were quoted last week at 601c/kg, down from a recent high near 800c/kg in October.
MLA senior analyst Peter Weeks said grassfed demand out of Japan and Korea was a little better in relative terms but the current market for 100-day grain beef was "really quite poor". "However, it seems to me that the demand situation in North Asia is now turning a little," he said.
Signs of a little more interest in shortfed beef in Japan were emerging, and cyclically, at least, there was often a rise in price in the second half of the year. "My feeling is that we are likely to see some gradual, rather than rapid improvement from now to year's end," Mr Weeks said.
The recent performance of the A$ had also impacted on demand and price patterns out of North Asia. The dollar had stabilised for some time within a 5pc range, but when the sudden 15pc movement occurred virtually over-night from US65c to US80c-plus recently, exporters and traders started to get shaken again.
Mr Weeks said he thought any integrated feedlot with contracts in Japan would have been 'doing all right' at present. "There is certainly a margin to be made, by somebody at the other end, on 100-day cattle in Japan at the moment. Currently the A$ is still 20pc lower against the yen than it was a year ago, and if Aussie fullsets are still 10pc behind where they were last year, there is a 30pc lower price going through to the marketplace in Japan."
Another factor was Japanese buyers are not compelled to compete more strongly for Australian grainfed, while Korea is in such a weak buying position. Korea is inundated by huge stocks of US product, and US exporters are dumping selected cuts at low prices into Korea. The result is flat demand for Aussie beef. A leading southern Queensland custom-feeder said feeding margins on 100-day grainfed cattle were still about negative $60/head. "It's not possible to forward contract cattle at current rates around 350c, and make a profit."
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