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Room on supermarket shelves for grainfed beef

Feedlot infrastructure has become a fundamental part of the beef supply chain with more grainfed beef than grassfed on supermarket shelves.

According to Meat & Livestock Australia, in the March 2021 quarter, feedlot cattle made up more than 50% of beef production for the first time. This trend continued in the June 2021 quarter.

The share of lot-fed cattle as a portion of total cattle output is likely to continue to grow as has been the case in the US.

With the recent focus on emission from the beef sector, feedlots may present an opportunity to manage targeted environmental impacts with technology and innovation.

As the Australian beef supply chain contends with reduced cattle slaughter due to a herd rebuild phase, the grainfed beef industry has provided a degree of consistency for Australia’s beef supply. Feedlot utilisation nationally has remained relatively high over the past 24 months, despite the impact of COVID-19 on local and global systems and record-breaking cattle prices impacting profit margins.

In the past ten years, grainfed beef has increasingly taken market share. Supermarket contracts and export specifications have underpinned the trend towards finishing grainfed cattle in feedlots. There is consumer demand for a grain finished product. Cattle coming out of feedlot have a higher carcass weight, and lot-fed Wagyu, for example, have a higher marbling score.

Large-scale feedlots are producing cattle consistently inter-seasonally. This represents a diversion away from ‘opportunistic’ utilisation which is largely driven by seasonal conditions. Seasonal utilisation is increasingly only common in sub-1,000 head feedlots.

Taking a que from the US market, the share of lot-fed cattle as a portion of the total beef output is likely to continue to grow. Over 80% of domestically produced beef is finished in feedlots in the US. In comparison, only 50% beef in Australia is funnelled through one of the 400 accredited feedlot operators nationally.

Capacity is being grown largely by established feedlot operators. Existing large-scale operators have broadly chosen to grow out feedlot capacity to licence capacity, as opposed to greenfield developments. High capital investment costs and licencing requirements have reduced the comparative appeal of pursuing greenfield developments.

The increasing sophistication of the industry is evident in the greater onus on animal welfare and environmental impact. While fewer greenhouse gases are emitted to produce the same amount of beef compared to pasture grazing, there are opportunities for feedlots to reduce the environmental impact of the beef supply chain.

We believe a move to feedlots will enhance the management of environmental factors in the beef cattle industry through technology and innovation such as methane capture and replacement of synthetic fertilizer with effluent capture and spreading.

Merricks Capital Partners Fund & Agriculture Credit Fund recently provided a loan to a large-scale feedlot business with assets in Victoria, NSW and WA. In addition, we are in the final stages of Due Diligence with a diversified agribusiness which includes a 10,000+ head feedlotting business.

Image Credit: Claire Dyason & Harmony Agriculture & Food Company

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