A $100 plus rally wheat prices in the past 12 weeks is presenting challenges to Darling Downs feedlots.
Sustained low grain prices during 2016 and the first half of 2017 provided a favourable trading environment for southern Queensland feedlots. During this period, Queensland cattle on feed numbers pushed to record highs on the back of cheaper feed ration inputs and strong export demand for Australian beef.
The latest ALFA Quarterly Feedlot Survey showed Queensland cattle numbers on feed for the January to March quarter at a record high of 556,886 head which in turn lifted Australian levels above one million head for the first time.
How long these record high feedlot numbers last is being questioned. The recent sharp increase in grain prices across the Darling Downs and northern New South Wales has eaten into feeding margins and is expected to pressure cattle on feed numbers as the impacts wash through in the coming months.
Cattle prices have already come off the boil as lotfeeder demand cooled with the sharp increase in grain inputs. The Eastern Young Cattle Indicator price has fallen by more than 10 per cent from its highs of around 660c/kg in the early parts of the year to current levels below 600c.
But the drought conditions through southern Queensland and large areas of NSW show no sign of easing and a 10pc drought in cattle prices can only dampen the impact of the 50pc hike in grain inputs since April.
Northern grain markets continued to strengthen last week as feedlot operators chased old season’s grain to cover their nearby needs. Feed barley into the Darling Downs was $6 higher at $316, with reports of even higher values being paid. Stockfeed wheat into the Downs jumped by $10 to $330 delivered. The strong Downs prices are now supporting on farm feed barley and wheat prices deep into southern NSW as feedlots scramble for grain supplies to cover near term requirements.
In the medium term, feedlot operators will be questioning how long the $300 plus grain prices are likely to last and if they continue to keep the pens full.
Strength in the southern Queensland grain markets was supportive to NSW grain prices last week, while south east Australian markets eased with the rising Australian dollar and a softer tone in overseas markets.
New seasons export bids into Newcastle rallied by $15 to $337, Port Kembla was $6 higher at $301 while Geelong fell by $15 to $290 port.
Grain producers across much of Queensland and NSW are still holding out for rain to boost yield prospects, but time is running out in many areas.
Darling Downs farmers have enjoyed reasonable July rainfall but western areas continued to struggle. Dalby has recorded 31mm so far in July which is 134pc of the normal monthly rainfall while areas west of Goondiwindi have recorded less than 10mm.
It’s a similar situation through large areas of NSW, where farmers are desperate for rain to save crops following little rain over the past 8-12 weeks.