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BEEF: Australia: Feedlot Cattle Numbers Slashed
10/15/2007 6:00:00 AM

The September ALFA/MLA quarterly survey has confirmed expectations of a dramatic fall in numbers on feed nationwide. The total cattle on feed dropped by 189,506 head, or 22%, to 680,519, compared with the June quarter which stood at 870,025 head. Year-on-year the drop was even more substantial at 200,762 head or 23%.

"These results reflect the impact of the most difficult trading conditions ever seen by the industry," said ALFA vice-president Jim Cudmore. "The record high grain prices are compounded by a very strong Australian dollar. There seems little relief in sight for either."

With both local and export customers reluctant to raise prices, and feeder cattle prices still not low enough to restore a margin, feedlots are unable to offset the escalation in feed input costs. "There are few choices available other than cutting back the numbers of cattle on feed."

Low world stocks of grain and high global demand boosted by biofuels have driven international grain prices to record levels. Australia’s drought has compounded the pressure on grain prices. It is therefore difficult to foresee any fundamental weakening of grain markets.

Numbers of cattle on feed tumbled in all States. Worst hit was Qld with a fall of 62,561 (15%) for the quarter and 101,000 year-on-year. NSW lost 55,137, or 18%, for the quarter and Victoria dropped by 29,141 or 47.5%. Big percentage falls were also evident in SA and WA.

No feedlot has escaped being affected and the smaller feedlots have cut numbers most drastically. In the quarter those with fewer than 1,000 head capacity slashed numbers by 43,383 (49%) and feedlots of 1,000 – 10,000 head dropped by 25%, or 75,719. The remainder of the cut (70,404) was in the over 10,000 head group.

Feedlot utilisation contracted from 77% in June to 59% in September. This is the second lowest ever recorded, and a new low for the September quarter. However, feedlot capacity has continued to build. This can be attributed to the lag between commissioning and utilising pen space. This will support Australia’s long term ability to supply grainfed beef beyond the current difficulties.

Shipments to the major export markets have slowed. MLA’s Peter Weeks said September quarter grainfed beef exports to Japan (42,128 tonnes swt) declined 14% year-on-year. Shipments fell 5% in July, 15% in August and 23% in September. Shipments to Korea (10,620 tonnes swt) during the September quarter were 41% higher than for the June quarter but fell 24% year-on-year, as US beef returned to the market. The on-again-off-again return of the USA beef, however, makes for continued uncertainty for exporters to this key market.

The survey found that feedlots expected numbers on feed to continue to fall in the December quarter. "With continuing drought, ongoing tight global grain stocks and the A$ some 20% stronger in the past 12 months (hitting a 23 year high of US90c in October), it is hard to see any immediate reversal of the trend," said Mr Cudmore.

http://www.cattlenetwork.com/content.asp?contentid=168137