Markets

Chris Howie’s livestock market wrap: So what is in front of us?

Chris Howie , 09/12/2020

Chris Howie offers his perspective on southern livestock market trends, 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.

 

It is always easy to provide an opinion on what to buy if no one checks what the result was. In January, February and March, even taking into consideration the arrival of COVID, those that acted on my early suggestions – light cattle, PTIC /Cow and Calf units, plain cows or mutton should have picked up a very handsome dividend. I was surprised at how many last week made comment on this article and how some of the trades had performed. Any feedback is always good.

Some say it was luck but I think experience and understanding the trends paints a relatively safe picture. Reaction time to any opportunity is how to make the best return. Procrastination normally sees the best trades disappear.

Trends do not tend to change much and looking forward is far better than looking at the historical price movements. Providing a clear indication of seasonal demand is relatively simple however price forecasting more than two months out is very crystal ball.

Supply and demand trends generally move forward or back by a few weeks determined by rain fall and available feed. Pricing is much harder to predict as most times price volatility and erratic movement is driven by regional supply or international influences that can change markets overnight – whether political, seasonal or viral. Remember the Chinese Swine fever impact on the global demand only 12 months ago.

The outlook for the next four months looks positive however it is time for common sense based on understanding the livestock cycle, not panic about supply. Much the same as those caught in the “Grass fever” buying cycle it is important to gather information from outside of your area or local saleyard to get a feel for the market.

We all seem to get very wound up about the ECYI or the various indicators. Remember they are an indicator only and cover a large geographically diverse area with a multitude of breeds. Experienced operators can see the subtle changes inside the larger number. However those that fixate on the indicator number as the only reference for a decision can quickly find themselves a long way off track whether it be beef, lamb, live export, wool or grain. Reading between the lines is very important and worth the effort of finding a reliable source of information based on fact not emotion.

Looking at the indicators specific to sale type or region are also only high level snap shots and your individual circumstance, breed and buyers in proximity will determine the value you receive. The ECYI being around 800 cents in December means nothing if your cattle are not ready for sale until May.

Marketing forward – With the advent of the various specialised marketing brands based on assurance programs aligned to grass fed, grain fed, feeder it is absolutely critical that you drill into the information that aligns to what you produce. Not the historical analytic view of the world past. Measuring the difference between feeder price in the north and south serves little purpose – Do your angus steers have a hump and are going to Indonesia on a ship? No – so what is the point of the comparison at farm gate?

As an aside several of us do wonder why the assurance programs run independently by various companies do not have a one stop application / registration portal? It can be easily supplied by industry to cover the requirements of the aligned programs. It seems to me that this would be a relatively simple process with a tiered program rating dependant on the various requirements of the end user without impacting the proprietary advantage of their branded program. Just a thought.

So what is in front of us?

When we are busy we don’t think about the next cycle, many which happen every year. A bit like how Easter creeps up on us even though we have had 2000 years to plan for it.

December – buy weaners and store lambs, sell what is ready, plan an additional trade opportunity using the green in stubbles.

January – buy weaners, sell lambs that are ready before Australia day long weekend. Often the lamb market drops at the end of January when those returning from holidays have a “bloody hell feed is running out – get rid of them!!” moment. Joined heifers – start looking early and buy if they suit instead of waiting for 1 particular sale.

February – buy lambs & plain sheep – both to target sale April onwards. All of those old ewes carried for one more year and re-joined will be losing teeth. They do feed well on a grain ration.

March – buy lambs & plain sheep. Target selling dry or aged cows before spring calvers sell their dry’s. Set up pastures for cattle feeder supply into the winter. Northern cattle muster starts with indicative export pricing starting to appear.

Demand – I would find it highly unlikely any processors will ramp up production levels prior to Christmas and in the North it may head the other way on the shortage of numbers. It seems every year some producers and agents think the market for beef will kick prior to Christmas. From my experience every processor and feedlot have most of their pre Xmas supply fixed by mid-November with enough space left to ensure markets are supported and supply relationships with producers and agents are maintained.

Government initiatives and relaxing of COVID restrictions has had little impact on the livestock industry and much of the commentary is conjecture only and should not take producer focus away from maximizing production.

Positivity in the livestock industry should be our focus leading into 2021. We have areas with good carry over feed, month on month supply is still relatively low and the world still needs to eat. Concentrating on creating as much weight in as short a period of time is always number 1 priority.

Cattle

Heavy cattle – cows and Bullocks eased 20 – 35 cents last week. They are still providing an excellent return but I think many thought the market would continue to hold. It is probably worthwhile looking at what the reasons where for holding on so long and if you should change something next year.

Last month Rob Inglis raised the fall in weight gains on livestock – nearly all producers and agents I saw last week commented on how cattle had stopped because of rank feed. Some back to .5kg/ day when 2 months ago they were at 1.2kg/day. I cannot stress enough how economically worthwhile it is in getting a livestock production specialist to map your feed for you in the trading environment (Breeders also)

Leading into the main weaner sales most reports are the calves are in good order and probably 20kg in front of last year. What I have saw last week is don’t set your sights on buying under 270 kg – they are not there. If you find some they are smaller for a reason considering season so be careful.

Speaking to Brett Shea, Livestock Manager at Albury he said a number of producers are selling weaners early to capture the market which would have normally presented in January. This comment has been repeated by many other agents.

Over the past 5 years a significant live export order has been sourcing supply during the weaner sales for the Russian market. At this time, it is highly unlikely this order will appear at this year’s sales.

Yea weaner sale report from Ron Rutledge, Nutrien Victoria & Riverina. Steers 380kg+ $4.40, 300kg $4.80 – $5, Heifers 370kg $4.15, 300kg $4. Ron said quality was very good but no light cattle.

Attending several sales in Victoria last week, both feature weaner and store sales. The demand was still strong although I did see a slight softening in price with a week of heat in the south. At this time of the year markets are very reactive to a hot day or two.

It seemed many were trying to buy to a rate of $1600 – $1680. One sale started on a softer note to recover with a couple of astute agents making phone calls and obtaining an order for the later parts. The easing of prices for heavy steers is starting to reflect the processor and feedlot price reductions over the past few days and may indicate a softer note over Christmas.

Report from Dean Coddington, Spence Dix and Co, Keith with the annual Amherst sale for Ian and Louise Johnson. Offering 2700 head in their traditional on property sale interfaced online with FarmGate Auctions. 2034 steers averaged $1675 to top at $2070 with the 584 heifers averaging $1388 to top at $1690.

Paul Kilby from TDC Penola provided feedback from the Naracoorte premier weaner sale. From all reports this sale was an absolute blinder with quality cattle in excellent order from start to finish. 4491 steers offered with many being EU accredited. 400kg +$4.30 – $4.45, 350+ $4.30 – $4.70, 300+ $4.60 – $5.00. Non EU less 20 cents.

Bob Jakins, Elders A+ coordinator in Queensland and NSW said the extreme heat is driving sales onto the Auctions Plus platform at present. Bob had an early start at 4am mid week to assess 500 steers before the heat. Great common sense for the welfare of the workers and the livestock.  Many in the north who were hoping for a significant November rain now have no option but sell.

Sheep

The early 1st x ewes sales at Naracoorte, Bendigo and several other centres can only be described as fantastic. The best I saw was a line sold for $472 sold by Elders Naracoorte with a slide rule needed to pick the difference between the top lines across all agents. Robin Steen’s crew from PPHS rung the bell on having the most yarded. It was amazing the following weeks 1st x ewe lamb sale the prices were only $50 behind with many lambs at joining weight already because of the season.

I have heard many comment “how can you make money at these prices” but when you pare back the numbers it makes good economic sense. Simple math – Sold CFA ewe $180, Young quality ewes well joined provide 110% lambing year one and head towards 130 – 150%. To me these ewes, which tend to last 7 years, reflect a very solid commercial return at these prices.

Early lambs have been dressing very well however some of the later areas are noticing lambs not yielding as they have in past years. I mentioned last month the feed is too rank to convert and the need to recognise this and act accordingly will help. A lot of the professional lamb fatteners are targeting the big numbers at Hamilton and Naracoorte with Ballarat just starting to fire now as well.

Ron Rutledge from Nutrien quotes lambs as holding relatively static with heavies $7.20 and trade $7.30 – $7.50. Store lambs seem to be buyable with 30 – 35kg models around $135 – $145 in reasonable numbers. Skins are still little to no value.

Bendigo this week only drew for 19,000 lambs which is normally double that. Processors are keen to look at lambs for the Xmas break and as suggested the autumn / winter supply will become tight.

I caught up with Mick Curtis, Rodwells, Euroa, he is comfortable with the feed situation through his area. Mick trades a significant number of lambs each year and the continued showers are keeping a green pick in stubbles and pasture with lucerne areas looking very good.

I noticed some commentary about the mutton export price being under pressure. Irrespective of the end user when lamb supply is high mutton demand declines, just like god made little green apples. When lamb numbers fall mutton becomes the elastic to ensure processors keep the lines running.

Pastoral ewe numbers will be in short supply in the new year. Areas like the North West and East of SA, Broken Hill and the Western division of NSW all have feed in hand and will keep all of the breeders they can.

Agency term for this month

“Going off like a Frog in a sock” is a term used when a buyer at a sale seems to be driven by ego, hat size or belt buckle rather than rational execution of the order.  As an inexperienced agent/client it is easy to get caught up in the excitement of bidding that often leads to an “Oh shit” moment at the end of the sale.  In my experience just poking along and buying to rate provides a better result than blowing the sale up with a “look at me” mentality. Continually working out your overall buy price, weight, numbers and averages is very important. It is said the money in a trade is made when you buy the livestock not when you sell them.

Safety

In my past life this was the time of the year to constantly remind those working with livestock to be safe. Long hours and hot weather for agents, carriers, saleyard staff and producers see us all becoming weary on the lead up to Christmas. Remember many of the new and young staff do not have the experience or resilience that time in industry provides. This is magnified when dealing with uneducated weaners at store sales or drafting calves off the cow.

As much as COVID has disrupted everything Australia and New Zealand are the luckiest countries in the world and we should take the time to remember this from time to time. I cannot remember such a paradigm shift in the livestock industry in such a short period of time. The use of technology to manage around COVID restriction has been amazing. Just like the development of the Spitfire – when there is no time to dwell development accelerates.  Don’t get dragged down by the whingers and look forward to a better 2021.

I hope everyone gets to catch up with their family for Christmas. I know it has been difficult for many although it seems Christmas has a bit more meaning this year because of the time apart for some families.  All the best

Opportunities

  • Get set for the wet – set your finance facilities up
  • Lambs for the autumn sale period
  • Buying weaned calves
  • Re set for next year and don’t fall back to old habits

 

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Comments

  1. ANDREW LEPLEY, 10/12/2020

    Great article Chris and even a little bit of the late Glen Kiel in your last sentence.

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