Livestock analysis: Restockers paying more to fill paddocks
Margins between selling feeder steers and buying in restocker yearling steers are tightening. Livestock expert Jenny Kelly analyses the numbers.
Once upon a time when steer prices were analysed it was all about the strength of the bullock market and financial returns for heavy slaughter cattle.
Now it is all about the feedlot sector and returns for backgrounded steers weighing 450kg to 550kg liveweight.
Consistent returns of $2200 to $2500 for good feeder steers in recent months was the reason put forward for another spike in weaner and calf prices at store sales like Euroa last week.
There were prices achieved for lighter weight young calves at Euroa that tested the record books in terms of cents-a-kilogram rates paid at a physical store market.
Examples included Angus weaners with a displayed weight of 222kg which sold for $1870 to work out at 842c/kg liveweight; or 12 Angus and black baldys at 201kg which made $1590 or 791c/kg. Heifers were also in a mix, with 30 Angus weighing 261kg selling for $1840 or 704c/kg.
Agents said the central driver was the strength of the feedlot sector.
“You’ve got people who have been selling feeder steers for 550c/kg or up to $2500 and they have to go back in,” Col Broughton of Nutrien at Euroa said.
A similar observation came from agent Dan Ivone, Nutrien Paull & Scollard at Mytrleford, as he watched the Euroa sale.
“Feeder steers have been going out at $2300 to $2500 and spring is not that far way, so what you are seeing is people trying to keep paddocks full,” Mr Ivone said.
The graphic below compares the national indicator price for feedlot steers sold at major saleyards, compared to yearling steers sold to restockers.
The two trend lines follow a similar pattern, and you can see in the data how when heavy feeder steers rose above an average of 460c/kg liveweight in late June it triggered the restocking market to also go higher and peak above 580c/kg.
The other interesting point in the data is how the price gap between feeder and store steers has stayed fairly consistent for most of this year at 90c/kg to 100c/kg — the latest figures have feeder steers at 487c/kg and restocking yearlings at 585c/kg.
Although these prices displayed are for cattle sold at prime markets and don’t truly reflect the really extreme liveweight money being paid at times on AuctionsPlus, and now at store sales.
Whether such a price difference is sustainable can be debated, and it depends on how you do the figures. At the very least margins are certainly tightening up.
If you break it down per kilogram, if you pay 600c/kg for a 300kg store steer ($1800) and are selling a 500kg feeder at 500c/kg, it means on paper you are getting paid the equivalent of $3.50/kg for the extra 200kg of weight added to it.
Go to the extreme and if you pay 842c/kg or $1870 for a 222kg steer, then the extra 280kg added to take it to a feeder weight of 500kg works out to just $2.25/kg (if the sell price remains at $5/kg to the feedlot).
It used to be that buying light cattle for a smaller outlay, say under $1000, was seen as a risk management strategy. But I’m not sure that argument holds when they are costing upwards of $1800.
However, it needs to be noted that it was a wintery yarding of cattle at Euroa and a lot of steers had decent frame and looked heavier than their displayed weight. It meant on paper they sale probably wasn’t as extreme as it sounds, as it would have been possible to quickly add weight to many of the yearlings and calves sold.
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