Strong start to 2022 for lot fed sector
25 May 2022
Key points:
- National numbers on feed have risen by 9.5% or 109,000 head in the March 2022 quarter.
- National capacity increased by 2%, while turnoff also performed that of the December 2021 quarter.
- Grainfed exports faced significant headwinds in early 2022 but the key market of China still rose by 6% on year-ago levels.
The Australian lot feeding sector has had a strong start to 2022, outperforming the previous December 2021 quarter in nearly every metric measured by the Australian Lot Feeders Association (ALFA) Lot feeding brief released by ALFA and MLA this Monday.
Overall, confidence in the sector can be measured by numbers on feed and national capacity – both of which outperformed the December 2021 quarter to be higher by 9.5% and 2% respectively. Medium term market confidence for grainfed cattle can be attributed to this national capacity increase.
Meanwhile, the national utilisation rate rose by 5% quarter-on-quarter to hit 85% utilisation nationally, demonstrating the robust demand for Australian grainfed beef. This comes as lot feeders look to ramp up production following a record breaking 2021 grain harvest and as large volumes of weaner cattle were made available during the spring–summer weaner sales across the eastern seaboard.
Turn-off on the up
Following on from an increase in pen space or capacity and a 9.5% rise in numbers on feed – driven favourably by a 58,000 head increase in Queensland and a 33,000 head increase in WA – cattle turn-off for the March 2022 quarter also outperformed that of the December quarter. This continues the sustained turn-off growth seen in the sector since the December 2020 quarter.
In the March 2022 quarter, numbers reached 742,323 head – an increase of 2.2%. When compared to year-ago levels, the significant growth in turn-off the sector has experienced in the past 12 months is evident. The March 2022 quarter turnoff volumes were higher than the volumes seen in the March 2021 quarter by 11.5% or 76,787 head.
Grainfed exports
Although flooding, labour issues, COVID-19, port closures and supply and logistical challenges have impacted the performance of Australian beef production volumes in 2022, a key export market for Australian grainfed beef grew.
In the March quarter, China grainfed exports rose by 6% compared with year-ago levels. However, Japan continues to dominate the market, accounting for 41% of total grainfed exports for the March quarter.
Overall, due to the existing industry challenges, grainfed exports are down 18% or 14,256 tonnes against the December quarter.
Sector holds strong
Significant headwinds for lot feeders remain, including the Ukraine conflict and its impact on grain prices as well as the buoyant feeder cattle market, which is placing significant financial pressure on margins for lot feeders. Among other supply chain burdens such as processor capacity, these challenges are important to consider.
Overall, however, the feedlot sector is in a strong, well-established position to continue to develop its role within Australia’s beef industry and meet the demand for premium quality beef on the export market.
The successive strong seasons and the continued growth in utilisation and capacity has demonstrated the medium-term confidence the sector is experiencing in the role it plays, despite the vast areas of the beef regions of the country with significant pasture banks available.
With increased capacity and utilisation a sign of the changing turn-off points structurally for producers as the herd rebuild continues, further, detailed analysis conducted by MLA’s Market Information team can be found here.
