Grain feeding lambs is a risky business

Mecardo - The Stock Take: Livestock Market Analysis - Grain feeding lambs


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Mecardo Livestock Market Analysis

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WITH the tough season across much of the East Coast, there will be plenty of lambs out there requiring feeding to finish this year. The question is whether it’s worth it with store lambs and grain prices at their current levels?

There are three main factors which govern the lamb feeding equation. The prices of store lambs, the price of finished lambs and the price of feed. All components have been volatile, although for now, grain prices seem to have settled. The future carcass price of lamb, however, is still up for conjecture.

In July, our calculations had a full grain ration at $450/t, store lambs at 580¢/kg and finished lambs 550-700¢/kg cwt. Lambs that went onto feed in July would have made a healthy $60/head profit after feed, but before labour. The punt in July has paid off, largely due to price rises.

The current scenario has the full ration at around $500/t, store lamb prices at 850¢/kg cwt and we put the finished lamb scenarios in at 600, 700 and 800¢/kg cwt. This tightens the equation, and without a higher trade lamb price or some cheap grain, it becomes problematic.

Lamb finishers paying up to $120/head for store lambs are being optimistic if they are going to use grain as feed to finish (Table 1). To turn a profit on these lambs, the trade lamb price will have to be around 800¢/kg cwt or $167/head for a 20.2 kg cwt lamb.

What does it mean?

The falls in lamb markets over the last couple of weeks might be a correction rather than the start of a downtrend, but it seems the supply of finished lambs is finally starting to improve.

Those who have bought store lambs to feed in recent weeks should still be okay with finished prices at 800¢. But the margin gets tighter for grain-fed lambs as we move into the 700-750¢ range.

If spring is as dry as forecast, taking $110-125 for store lambs will offer a low risk, low labour outcome that’s attractive to many, so some certainty and incentive by processors might be required to encourage lambs to be carried on.

Table 1: Lamb trading scenarios

Table 1: Lamb trading scenarios

Based on a purchase weight of 32 kg lwt and with a finished lamb at 20.24kg cwt, there needs to be a $42 spread between store and trade lamb prices to make feeding work. Trade lamb prices below 700 cents will not produce a profit.

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The story Grain feeding lambs is a risky business first appeared on Farm Online.

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