At the margins
The Snapshot
- The weighted average feedlot gross margin has eased 30% since late 2020 to sit at a monthly level of $220 per head for March 2021.
- Since the start of 2021, feed regimes on a short rotation eased by 16% and the medium fed trade has been off by 30%.
- The long fed rotation has seen gross margins rise by 21% since the start of the season.
The Detail
The weighted average feedlot gross margin (which includes short, medium and long term feed regimes) has eased 30% since late 2020 to sit at a monthly level of $220 per head for March 2021. Despite the softening trend, the gross margin is still holding at the upper end of the normal range and around $90 a head higher than the long term average of $130 per head.
Feed regimes on a short rotation (circa 100 days) and on a medium rotation (circa 150 days) have seen margin ease the most since the start of 2020 with the short fed trade easing by 16% and the medium fed trade off by 30%. Meanwhile the long fed rotation (circa 200 days) has seen gross margins holding up relatively well with a 21% increase in margins posted since the start of the season. Indeed it is the longer fed trade that is keeping the weighted average gross margin at reasonably healthy levels currently.
The short fed seasonal pattern shows the margin within the normal range that could be expected during this time in the year. All of the recent decline in the margin has occurred from February to March with the gross margin slipping from $187 per head to $153. The gross margin for March 2021 sits 11% above the ten-year average pattern for March.
The medium fed rotation gross margin is currently placed at $299 per head, with a sharp 38% drop noted during February to March. Despite the solid month to month decline the medium fed trade is still placed just above the upper boundary of the normal range that could be expected for March and is 90% higher than the ten-year March average of $157 per head.
The long fed rotation gross margin improved by 30% during January to February, but then has eased 7% during March to sit at $541 per head. As the seasonal pattern highlights the long fed regime is running well above the levels that would normally be expected for this time in the season.
Indeed, compared to the ten-year average pattern the 2021 trend from January to March has achieved gross margin result that are a whopping 245% above the ten-year average trend levels for the first quarter of the year. Recent anecdotal reports from lot feeders have indicated a move to longer feed regimes in recent months and the exceptional gross margins being achieved, according to the data and theoretical feeder margin model, could be a reason why the longer term trade is being favoured.
