Widespread rain takes pressure off some key feedlot ration commodities
PRICES for some of the key commodities that make up feedlot rations have come down in the past month, as widespread rain sets in across large parts of eastern Australia.
High ration costs were a feature of last year’s cattle market crash, with some lotfeeders telling Beef Central at the time that it was cheaper to buy kilograms than put them on with expensive rations.
While many factors were forcing prices up, one of the main reasons was drying out grazing conditions and a shortage of paddock feed pushing producers towards commodities like cottonseed, hay and grain.
As the rain set in November, producer demand for these products dried up and Beef Central has been taking a look where the market for them might be heading.
Prices for cottonseed have come down by at least $150 since rain started to fall in Queensland and New South Wales in November.
The commodity skyrocketed last year, with large amounts of seed forward contracted to China and the United States and producers scrambling to get their hands on it for drought feeding. One industry participant told Grain Central at time that some quotes were higher than $700/T.
Woodside Commodities managing director Hamish Steele-Park said while the last month has been a low liquidity environment, due to the festive season break, prices had come back at least $150 since November.
“As a benchmark you could say the spot price is about $500/T delivered Moree. There is an inverse in the market, with a new crop about $440/T and old crop about $500/T,” Mr Steele-Park said.
“In the current seasonal climate where there is plenty of rain, buyers aren’t rushing the gate.”
Last year’s spike saw cottonseed price itself out of some feedlot rations, or lotfeeders decreasing their cottonseed inclusions.
There has been some talk of increasing cottonseed inclusions again, however, many feedlot commodity buyers are only just getting back from break and are still working out their strategies.
Mr Steele-Park said feedlots were likely waiting to see how the cattle market develops.
“Feedlots will probably have an appetite for seed with values coming down, I suspect a lot of them already commitments on the books at high values,” he said.
“The cattle prices have firmed up and they are a bit harder to buy and numbers on feed might come back a bit, so they are just playing a waiting game.”
With last year’s crop pricing itself out of export markets, plenty of cottonseed is said to be in sheds and storages. Rainag director Ian Grellman said there might be some issues moving it.
“Some of the ginners have fairly full sheds and they don’t have people picking it up,” Mr Grellman said.
“Even before the rain started the demand slowed down, a lot of producers saw colour on the weather map and they were out of the market.”
While the rain has decreased demand for cottonseed, it has prompted a large dryland cotton plant this summer. Mr Grellman said while he thought there may only be irrigated cotton going in the ground this summer – plenty of dryland crops have been planted.
“Some big acres gone into dryland cotton crops in western New South Wales and Queensland and they are looking pretty good for this time of year with a full profile of moisture and plants well established,” he said.
“They are not home and hosed yet, the rain has been a bit patchy and it depends who has managed to get the big storms.”
Mr Grellman said irrigated crops were also coming on well, with parts of southern Australia hoping for some more warm weather.
The market for white grains has also decreased in the past month, with wheat and barley hovering around the $400/t mark. (more in this week’s Feedgrain Focus)
Mr Grellman said pressure has come off wheat and barley markets internationally, with pressure of conflict in Ukraine and other geopolitical issues not as apparent.
“A lot of people are realising they will still be able to eat, so the panic has come off,” he said.
While there is still plenty of grain on the domestic market, Mr Grellman said it could tighten later this year.
“There wasn’t much of a crop west of the Newell Highway, so a lot of those guys will be selling the crop from the year before if they have any left,” he said.
“There were some reasonable crops in the Central West area of NSW, not bin-busters, but there is some production and some of those guys will be delivering into the Darling Downs and meeting the feedlot zone.”
“We still have about 10 months until get another harvest of barley and wheat so it could tighten later this year.”
While prices of cottonseed and grain have eased, hay is a different story.
Feed Central managing director Tim Ford while demand has dropped as the season has set in, the rain has impacted supply.
“About 30pc of the product we had inspected and listed on the website was stacked outside – we can’t sell any of that,” Mr Ford said.
“Once you start picking through stacks of big square bales, you will find extensive damage and it is hard to justify sending truck to it.”
Mr Ford said more hay producers had sheds and for various reasons had less need for the immediate cash flow of selling hay, which had also limited supply.
Some crops that were intended for either wheat or barley were turned into hay with the dry weather setting in and demand from producers. Mr Ford said most of that was sold quickly or not made.
He said plenty of product was still on the market, but he was expecting a shortage of hay in the winter months.
“Fundamentally, every year there is a shortage of high-quality hay over winter,” he said.
“Come winter, people start thinking about moving cattle or feed cattle and it all starts up again. There will always be hay, but the eyes get picked out of the quality.”
- For more on feedlot ration costs keep an eye out for Beef Central’s feedlot breakeven in the coming weeks.