HIGH grain prices are adding to the woes of Queensland lotfeeders, with a 30 per cent jump in grain prices estimated to add around $60/head to the average feed bill.
It's a crippling additional cost for an industry already struggling to cope with the sustained high Australian dollar and sluggish export demand.
Australian Lot Feeders Association (ALFA) president Jim Cudmore said most feedlot operators still had cheaper grain on their books and would be in a "reasonable position in the short term".
But Mr Cudmore warned that early spring was looming as crunch time for many feedlot operators.
"There is traditionally a lack of demand for export feeder cattle during the first few weeks of September because it is about 100 days out from the traditional shut-down period for most grainfed processing plants in late December and early January," Mr Cudmore said.
"A lot of the cheaper grain on people's books will also start to expire around September, so that's when I think we'll really start to see some pressure start to build on lotfeeders.
"We will probably see a significant reduction in export cattle going onto feed if grain prices remain above that $300/tonne mark for wheat."
Mr Cudmore said the domestic market would also be impacted with increasing pressure on processors, wholesalers and retailers to absorb the additional increase in production costs.
"There will be increased pressure on margins right across the supply chain," he said.
"Ultimately, those costs will be passed on to the consumer."
Feeder cattle prices are also expected to come under pressure, particularly if drier conditions in spring prevail.
"Any negative seasonal influences in spring will create all sorts of pressure on feeder cattle prices," Mr Cudmore said.
"This is the first season that we will have a significant increase in young cattle being available due to the major herd rebuilding that we have seen over the past few years, with good seasonal conditions prevailing across a wide area, so the weather only needs to get a little wobbly and the cattle market will be under a great deal of pressure.
"Opportunities for producers to custom feed cattle will also diminish because of the high grain prices as pro- cessors reassess their books."
Jason Shearer-Smith is the managing director of the 20,000-head Smithfields Feedlot at Proston, and estimates that current grain prices will add $60/head to his feeding costs.
Mr Shearer-Smith predicts those costs will be passed on as soon as cattle supplies return to normal.
"As long as it keeps raining, the feedlots are going to have to wear the costs because the wet weather is creating a shortage of supply, but in the long term I think these high grain prices will have to flow on to backgrounders," he said.
"We either need cattle prices to get cheaper or meat prices to increase, and I can't see meat prices increasing any time soon."
Fellow southern Queensland lotfeeder Charlie Mort, Mort and Co, said high grain prices were "just another negative" in tough operating conditions.
"Unless demand for our beef improves or the dollar goes down, the extra feed costs will impact feeder cattle prices," he said.
Meat and Livestock Australia (MLA) released their 2012 mid-year cattle projections on Friday, highlighting that tough economic conditions in key export markets would continue to put pressure on demand.
The report indicated that any improvement to operating costs from slightly lower cattle prices and increased grain supplies was expected to be overshadowed by the continuation of tough trading conditions into higher priced markets such as Japan and Korea.
At the end of March, the ALFA/MLA lotfeeding quarterly survey showed there were 752,113 head on feed in Australia, with numbers expected to fall in the second half of 2012.