Grain Price Dip Bolsters Lot Feeder Proftability

Key Takeaways:

• Current feed wheat and feeder steer prices offer favourable conditions for lot feeders.

• Darling Downs Wheat prices have dipped to $360 per tonne, the lowest since March 2022.

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• Feeder steer prices are at 316 cents/kg live weight (lwt), showing a decline from earlier in the year.

Grain prices have been on a downward trend since the beginning of 2024, presenting a signifcant opportunity for lot feeders to enhance their margins and instil confdence in the industry.

The Australian lotfeeding sector has seen steady growth, supported by robust infrastructure, access to export markets, and a stable domestic supply. According to the Australian Lot Feeders Association’s quarterly survey, the industry has reached record levels of feedlot capacity and cattle numbers. With

1.3 million head on feed and capacity reaching 1.6 million head, this growth underscores the positive outlook within the sector, buoyed in part by smaller lot feeders re-entering the market.

Feeder cattle and feed grain prices typically exhibit an inverse relationship, infuenced by factors such as climatic conditions affecting supply and demand dynamics.

Last year, this inverse relationship peaked, with wheat prices soaring to $463 per tonne while feeder steer prices hit 211 cents/kg lwt, the lowest nominal price since 2011. This trend refected the national herd rebuild, increased cattle supply, and poor harvest projections in key grain-producing regions.

However, recent trends show a narrowing of this gap, with wheat prices dropping to $360 per tonne, down 22% from the previous year’s peak. Meanwhile, feeder steer prices have experienced a modest rebound to 316 cents/kg lwt, marking a 53% increase from the lowest prices observed last year. These shifts refect market dynamics observed in late 2020, following post-drought livestock market recoveries and improved feed grain supply.

With weekly wheat prices remaining low and feeder steer prices continuing to ease, lot feeders are presented with an advantageous opportunity to bolster their proftability. By closely monitoring these market dynamics, lot feeders can capitalize on longer fed programs and potentially secure premiums for heavier cattle, maximizing their returns on investment.

Looking ahead, the trajectory of feed wheat prices will likely infuence next quarter’s turn-off numbers. Lot feeders are poised to leverage this opportunity and adapt their strategies to optimize proftability amidst evolving market conditions.