Michael McManus, AuctionsPlus Market Insights
August 29, 2019
It has long been industry convention that a c/kg premium is received for weaner cattle, when compared to feeders. The premium can typically be attributed to a range of factors including weight, greater volume, more marketing opportunities from a greater pool of buyers and a larger geographical area. Combined with management processes, many producers tend to sell earlier, rather than holding onto weaners to take through to heavier weights. However, the current drought conditions have seen a shift in this premium throughout 2019 towards feeder stock.
To look at the potential premium producers can currently gain from holding onto stock to reach feeder weights, the AuctionsPlus Market Insights team have completed an analysis on data from 2013 to 2019. For the purpose of the analysis, weaners were defined as all steers, excluding Wagyu, under the age of 12 months and weighing between 250 – 350kgs. Feeders were defined as all steers, excluding Wagyu, any age and weighing between 350kgs – 450kgs.
At a c/kg level, the premiums received have fluctuated over the years depending on supply and season. However, over the past seven years, feeder cattle have rarely outsold weaners. Between 2013 and 2018, weaners traded, on average, 11c/kg higher than feeders. However, in 2019 we have witnessed a considerable shift in the market in favour of feeders, resulting in a 18c/kg premium for feeders over weaners during the first eight months of the year (see figure 1).
Figure 2 highlights the historical throughput of weaners versus feeders sold online. A significant drop in the supply of feeder stock can be seen throughout the first six months of 2019. This is a result of the deteriorating season creating supply pressures, thus resulting in comparably increased returns. Throughout the year, tight supply has resulted in fierce competition for available feeder stock, particularly for those higher quality lines. In May, a line of 410kgs Angus steers offered by ‘Glen Collin Pastoral Co’ of Walcha, NSW, attracted competition from eight unique bidders from 2 states, eventually selling for 378c/kg, or $1550/head.
To put this price differential for 2019 into perspective, based on this year’s average market conditions, a 280kg animal would trade for $767/head, while a 120kg heavier feeder, weighing 400kgs would return $1,187/head (see figure 3). While not all producers are in the position to hold onto their weaners to reach feeder weights in the current seasonal conditions, those that have been able to in 2019 have certainly been rewarded. Although typically there is less risk involved with selling weaners, and traditionally a stronger c/kg return, in the current market, if producers have the time, money and the ability to hold stock for a further three to six months, there is considerable income to be made. However, it must be noted that there are numerous variables affecting the time and costs involved with bringing an animal to feed weight, and thus producers must make decisions based on their own individual operations and geographical location.