Markets

Chris Howie’s market wrap: ‘Concentrate on what you can influence’

Chris Howie , 02/07/2021

Chris Howie offers his perspective on market trends and opportunities in coming weeks and months, drawing from both his own observations and from a wide contact network of producers, agents, processors, industry associates and leaders developed during his extensive career as a livestock agent. Chris is Stockco’s Business Development Manager.

 

I had a little laugh thinking 18 months ago when I started these articles in the middle of a howling drought not many wanted to look forward at the “crystal ball”. Now with good prices and a sound season we have a plethora of articles and advice about the future which prompts me to talk about something else this month.

This diagram may help formulate your sales plan in advance, instead of becoming a reaction to the market movements. In 2018 we saw the wool market as high as it had been for many years yet the majority continued to stay in the spot market because “it’s here to stay” or “it might get better”.

Click on image to enlarge

Think about why the lamb and cattle prices must stay at any particular level and what part of that process do you control. The recent rally on cattle was again driven by international supply dynamics and continued rain in Australia. It is very rare we see prices go up and processor margins improve at the same time. Similar with lambs and mutton, supply and demand determine price. If you are not prepared to look at forward contracts the July spot market prices mean very little if you don’t sell lambs until October.

What I am suggesting is this: concentrate at this time of year on what you can influence and how to market your turn-off of livestock and wool to create the best average price.

Rebuild

Is it possible without improving survival rates? I note we are starting to see forecast graphs about the rebuild of the sheep and cattle numbers appearing on the back improved seasonal conditions.

A past client raised a very valid point: “The last time we saw major number rebuilds the old cows and ewes were worth very little. So most producers only sold the very old and kept the rest to continue breeding. The days of a chopper cow or a cracker ewe making 50 cents/kg are long gone. Now if they are still a viable breeding option the store market and processors compete directly for supply.”

Better prices = larger female slaughter numbers. Jason Trompf nailed it at agency training day early in the month: “The only way we can increase our overall herd / flock is to focus on how many survive with more focus on livestock production protocols, animal health and understanding how to look after the female from joining to weaning.”

Animal welfare – Penalties for breaches are increasing

Several states have or are about to change the animal welfare legislation and associated penalties. NSW has already passed theirs with a considerable increase in fines.

Here are some of the changes for NSW:

  • Failure to provide food and shelter: increase from $5,500 to $16,500 for individuals and/or six months’ imprisonment, with corporate penalties increasing from $27,500 to $82,500 for each offence (s 8);
  • Cruelty: increase from $5,500 and/or six months’ imprisonment, to $44,000 and/or 12 months’ imprisonment for individuals per offence. The corporate penalty will increase from $27,500 to $220,000 for each offence (s 5); and
  • Aggravated cruelty: the maximum penalty per offence will increase from $22,000 to $110,000 for an individual and/or two years’ imprisonment and from $110,000 to $550,000 for a corporation for each offence (s 6).

Social expectation is that we look after the animals that keep our industry prosperous. There is no room for cruelty and I consider most states will follow relatively quickly with voter acceptance.

Agency training in SA: I had a great opportunity to be involved with the Agent focused Red meat and wool growth seminars run by the SA government through PIRSA and MLA.

Agents & Brokers from all over SA were involved in discussions about Sheep and Wool on day 1 and Cattle on day 2. The seminar saw a combined attendance of 64 (some did both days) with 8 agencies represented.

Michael Blake, Senior Advisor PIRSA and Red meat and wool, focused on opportunity based on eTech in the livestock industry and coordinated the 2 days. Jason Trompf spoke to agents about helping producers read the animal health signals to lift survival rates and productivity in a manner that saw all engaged with a bit of humour and fact.

A deep dive into breeding traits that drive overall performance and removing the traditional fixation on single trait selection for genetics the main focus. Sheep especially are a multi income system these days and should be developed accordingly was a strong theme.

One take home message for next generation agency is about creating discussions with producers and exploring the resultant value proposition. Jason and Michael spoke to the group on how to create and capture meaningful data from individual enterprises using the ever-evolving eTech in agriculture.

The “weigh box” for lamb marking and utilisation of electronic eartags as management tools provides a real opportunity to track the performance of your lambs from marking to sale. I see this as a great investment and foundation for improving your ewe management and lamb enterprise by allowing producers to adjust their program and actually measure the benefits and additional dollars created.  The ability to capture this early information allows some significant and immediate opportunity to lift farm profitability without excessive cost for producers and agents alike.

SA government with MLA are the only state driving this forum targeted at agencies and it is a no brainer for it to be adopted across the country. Often the capacity of the agency community to drive change is missed when the various peak bodies meet.

I also attended a commercial merino producer day organised by Paul Kilby TDC at Eudunda in SA. With a progressive property tour involving 50 – 60 farmers and 5 properties visited. Each property had a line of 1 year old ewes and a line of ewes and lambs in the yards. The stud that supplies each of the exhibitors also attended and spoke for 10 minutes on the traits they are focused on. Chris Van Dissel PIRSA spoke about bio security. Great day all round and well received by those who attended.

EOFY – Don’t underestimate the quick run of numbers that will appear in July having been held back to mitigate taxation with the last 18 months prices. Wool, lambs, mutton, grain, cattle are often held until July to soften the tax bill and create a bubble of supply that can put a brief dip in the market. Although at the current prices not much sleep will be lost it is funny how much effort we put into minimising tax compared to improving our production and marketing outcomes.

Agency and Supply chain training – Wodonga TAFE have opened applications for their next intake of Certificate 4 in agriculture and workshop only training. COVID permitting the 1st workshop will commence late August / Early September. If you have a new starter interested in helping their career contact Simone Dane 0455 240 307 or drop a note to sdand@wodongatafe.edu.au

Sheep and lambs

Well, it’s the time of year that the lamb jobs starts to kick. Up until last week we saw prices holding and on some grids drop back under $8. Forwards have appeared with $8.70 for XB lambs into August.

Speaking to Joe Wilkes, Wilkes & McKean L/stock & Property, Wagga about supply of lambs. “clients with traded lambs are cleaning out paddocks and very few have stockpiled extra. However, the feed situation in the Wagga catchment will see some very good early suckers appear over the next couple of weeks with good feed and limited frosts. Even when we think numbers are finished they arrive from further afield,” said Joe.

Auction lamb sales are starting to see trade quality trade lambs moving past the $9 realm. Heavy export lambs are well into the $8’s. However any secondary drafts are not seeing this competition and remain in the high $7’s

Back in March some of the lighter lambs seemed well worth the money yet interest was limited in the south because it had remained dry. In my March article I made comment on the upside achievable by looking outside the box on these 20 – 25kg liveweight models. Well now we are at sale time and speaking to Ron Rutledge, Nutrien Victoria, the results achieved are looking exceptional and circa $100 margin per head. $130 second cross lambs coming back at $230 – $250 at Ballarat and the $80 merinos returning $160 – $180 in SA after being run through the vineyards.

It is easy to disregard some prices as “flash in the pan” but the Aussie White run has some serious legs with $993 received for station joined young ewes. It looks as though this breed, started in 2011, has found its feet and for a number of reasons has created a wide acceptance for those looking for shedding, high production, low maintenance sheep – or as I termed when I first saw them, “small cattle”. The focused marketing campaign run by QPL’s Craig Pellow and Tattykeel’s Graham Gilmour shows what can be achieved when using data, performance and commercial outcomes as the basis for a business.

Wool seems to be on a recovery curve with the EMI at 1420 – 1450 this week. I spoke to Andrew Dennis, Independent Wool Consultant, Adelaide. Having worked side by side with Andrew in my Elders days his international contacts and insight are second to none. Andrew said the wool market is very finely balanced and the 56,000 bale offering next week saw an immediate retraction of price. This and the European mills now in holiday mode see the main support base sitting with China. A lot of wool on hold has been transacted via A+ with the rise in price providing a nimble “cash in “option.

I wonder if the wool growing community will look at a higher percentage of forward pricing this time to flatten out the risk. The opportunity back in 2018 to lock price away was missed by most wool growers. Probably worth think about capturing the market rises this time around.

Cattle

The trade cattle shortage and demand for feeders is really driving the market. Sales are continuing to strengthen with many feedlots now operating openly across mixed breeds where once black was the only colour. Continuity of supply for the feedlot operations has taken priority over cosmetics and price.

Yet again we are becoming fixated on the EYCI and its record setting run. This is a great rear mirror view, but it does not provide any tangible budgeting information looking forward other than trend mapping against previous years. Make sure you base your buying orders and marketing program on feed mapping for best weight gains x time held performance aimed at your target market. This will deliver a better result than what last week’s ECYI tells you.

Cameron Wilson, Key account manager, Elders Brisbane said the feed situation for Southern Queensland and Northern NSW is very well set for the spring. Crops are up and in good order with most going into the first back to back season for a number of years. Finding the numbers will be the issue.

Peter Cabot Nutrien Wagga said cattle numbers through his catchment area have not really recovered from the drought sell off and it looks unlikely with current prices this will change much in the near future. Recent rains have the eastern NSW and Victoria well set for its run into spring also.

NSW bull sales ramp up in July with demand last year leaving a few buyers short. I would anticipate a very strong series this year and have noticed a few breeds coming back into vogue when comparing the weight for age returns. Hybrid vigour from a well thought out cross does deliver some serious money in the account. Always buy to improve your herd or risk going backwards.

General cattle – Hide prices have lifted from a very dull period of pricing and whispers are foetal blood pricing is starting to reappear from some processors on hooks cows that may have had an opportunity to the bull.

Get finance sorted early – With the potential of a very good trading period appearing in the spring getting your “trading facility” needs set up now is a great idea. Don’t miss the opportunities to buy and use your crop or future hay stubbles through not having the funding in place.

Opportunities

Light lambs from areas still dry

Ewe and lambs

Buy quality sires.

Cow and calf units to split.

Take some forward pricing – wool, lambs, cattle.

Make the effort to draft your best suckers off early and capture price.

Use your feed – set up a trading facility.

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