October 22, 2007

September Australian cattle on feed declines

Australian cattle feedlots plummeted in September due to escalating feed grain costs and difficult trading conditions that are challenging the viability of grain feeding. Cattle on feed in September dropped to 22 percent on June and 23 percent on-year, to 680,519 head ¨C the lowest since March 2004, reports Meat and Livestock Australia.

Feed grain prices rose to a record of 50 to 85 percent in September compared to the same period in 2006. Passing additional costs to consumers has also cut the numbers in an effort to stem financial losses.

Feedlot capacity utilisation fell from 77 percent in June to only 59 percent in September ¨C the lowest in almost nine years. While the significant decline in the number of cattle on feed was the primary reason for the decline in utilisation rates, a rise in overall capacity, to a record 1.15 million head, also contributed.

Export demand for grainfed beef continues its downward trend on the same period last year, with shipments to Japan and Korea for the September quarter back 14 percent and 24 percent, respectively.

The only positive news for lot feeders is the weakening in feeder cattle prices, with average prices for September falling 6 to 10 percent below the previous month and 13 to 16 percent below the same period last year. Further price falls have been recorded during the first three weeks of October.

Analysts see cattle on feed numbers will still fall further during the final quarter of 2007, with little relief in feed grain prices. Ongoing dry conditions may see feeder cattle prices continue to weaken but widespread rain could see prices jump, further impacting on costs and the ability to source suitable cattle. While demand from North Asia is expected to improve during the final quarter of the year, reduced grainfed beef supplies will constrain shipments.