Markets

Chris Howie’s livestock market wrap – April 2020

Chris Howie, May 5, 2020

Chris Howie, Stockco Business Development Manager, 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.

 

THE current recovery of the southern feed situation has been nothing short of exceptional.

Areas that were so barren you would wonder where the seed would come from are now experiencing one of the best feed seasons ever from the New England in NSW through to the SE of SA.

Understanding there are still areas that have missed the rain, but the map is slowly filling in.

David Fogg from Elders Wool in SA said the North west from Pt Augusta to Glendambo looks good but further out it starts to become patchy. The North East Pastoral has missed again and is still drought affected. Graham Fullgrabe from Sharp Fullgrabe & Co in the East Gippsland said Orbost, Bairnsdale and west is well set for feed. However, the Monaro through Cooma is very bad with large numbers of stock moving prior to winter. Eden, Bega and the surrounding areas has turned over night with many of the pastures being summer based grass and the cold blast will very quickly see pastures disappear. The high country around Omeo and Benambra have winter grazing crops in but these are targeted at the calving and lambing windows.

Will Jennings, Paull & Scollard Nutrien at Albury, said following the bush fires the country is shaping up to be a fair season. Early heavy rainfall in northern NSW provided the fire affected areas around Corryong with destination markets. Processor demand allowed vendors trying to destock quickly due to lack of fencing and feed opportunity to sell at fair rates. With another 100mm over the last few days vendors are not needing to feed livestock and have focused on improving pastures and winter crops to re establish quality feed.

Recent rains right through the southern agricultural areas have seen tractors appear everywhere like moths to a light with sowing a priority – warm soil and moisture, happy days.

Availability of feed is driving the store markets to new levels. Many have sown grazing crop on the first rain and these have had perfect growing conditions with warm soil and timely rainfall. However, this is creating the quandary we are now looking at. The store market and the meat market are at polar opposites.

Speaking to Paul Leonard at Thomas Foods International he said it is easy to focus on the negatives at present but there are a lot of positives appearing.

Paul said with the feed season he is hearing good lambing and calving rates being reported. This also allows sucker lambs to appear in prime condition July/August returning to traditional supply timing.

Processor demand in spring will be strong with chains returning to full capacity.

Government support for airfreight has allowed light lamb to be exported again showing immediate price impact. It was interesting to hear the main end user of lamb racks is the cruise ship industry followed by the US food service industry. Quality restaurant grade cuts are now in plentiful supply with secondary cuts becoming the cost driven “go to” customer focus.

Heavy stock prices are now feeling the international slowdown with lambs following a trend a little later than cattle. The domestic weight ranges are not being impacted quite as much.

Although as discussed in a previous article I would expect to see grid pricing start to tighten up on extra heavy prime stock suited to export markets.

Speaking to a SA meat wholesaler the quality of meat on offer domestically is excellent with prices easing significantly for high quality cuts. I would suggest it is a great time to fill the freezer with beef and lamb. 

Using feed

This poses the question of what to buy considering the end user market is under such pricing pressure yet the residual effect of available numbers following the drought is still a major player.

My thoughts are: look at the supply needs in 6-9 months time. Excess meat on market in cold storage and limited demand have the next few months well covered.

Reactivation of the hospitality trade will be the driver on utilisation of this over supply.

I suggest when hospitality re-opens the demand will be significant and could indicate a very fast swing from oversupply to a supply shortage.

But when will this happen? Considering the moving parts if buying livestock, I would be targeting lighter store stock or breeding females that you can carry through the current situation.

Ensure you have at least six months of feed in front of you to allow this supply/demand bump to be ridden out.

This may mean buying a few less but doing a really good job on them.

Cattle

Feeder prices have held up till this week and are hovering around $3.80 – $3.90 for best types.

Live export in the north has had a big reset with reduction in price and ships, mid $3 back to high $2.

As previously mentioned in Beef Central this has allowed processors and grass-based producers to gain access to numbers.

Graham Fullgrabe, Sharp Fullgrabe at Bairnsdale said there are good trading orders around the Easy Gippsland area although not much joy for short term winter fatteners at present. Cows prices are holding and showing good returns.

Sam Bartlett, Adcock Partners at Quilpie, let me know the river country is excellent.

Producers are currently tossing up whether to hold cattle and fatten further or to sell and buy in lighter stores and carry them through.

Good conversation to be had and considering the live export blip, opportunities in the north are creating opportunities to purchase brahmans in the 250 – 320kg range – steers and heifers to put on grass.

Established processors are continuing to operate in the south with grids reasonably stable although as we have seen this can change quite rapidly due to international influence. Some newer processors who are supplying developing export markets are becoming very selective on quantity required in turn this has seen processing days reduced some weeks.

Sheep

The store market is still rocking along with $444 received for some joined first cross ewes and store lambs still ranging from $5.50 – $6.50kg lw.

We all like to read the big prices but be mindful these are often exceptions and most of the offerings average considerably less.

Sheep and lambs are still coming from WA and look like reasonable buying even with the freight component factored in.

SIL Merino ewes in large drafts landing home for $250 – $270. If you are in the market take the time to look at the comprehensive sale reports on offer. Especially Auctions plus considering the volumes being offered from all over Australia.

Tim Drum, Riverina Livestock Agents, Wagga said heavy export lambs are sitting around $7.50 – $8.00 although extra heavies 30kg plus are starting to struggle on the grids, Trade lambs $8.60 – $9.20 and light air freight lambs have eased a little but have been making $9.00 – $10.00 kg Drs. Mutton remains strong with prices $6.00 – $7.00 and the odd higher. Tim also mentioned supply is starting to taper off quickly with limited numbers left in paddocks.

Skins – XB lamb skin prices are under extreme pressure with some disposal fees appearing. Merinos with a jacket have been impacted by the fall in the wool prices but are still providing a return dependant on length and VM.

Moving into winter we often see sheep and lamb processors close for annual maintenance during low supply times. If you are a producer be mindful that we are starting to see shifts reduced at some works because of limited numbers which can quickly change demand and subsequently prices.

With the current feed situation, the supply of stores moving into spring may well be impacted with many being in prime condition and carrying weight. This in turn may see some of the store and lighter orders prevalent over the last 3 years find supply difficult to come by.

Wool

Watching the wool market, the virus impact internationally has created the perfect storm scenario with processors in lock down, retail closed and consumers without money.

This seems to have moved wool from an extremely coordinated and unified sale process to a multi mix of sale types, spread offerings and drivers.

Sale methods running at a tangent may well be playing into the buyers hands if not careful – divide and conquer buying patterns appear very quickly in this type of environment.

Wool supply is designed to flow through the system allowing volume to offset small margins at a broker and exporter level. Once it is retarded in any way the cost base such as warehousing starts to impact the system.

Wool producers have developed shorter shearing timelines. Eg 8 months instead of 12 months. This seems to work well if the seasonality – cropping, grass seeds, lambing can be managed. Recently, six months shearinga are being advocated as they fit easily into a seasonal spreadsheet.

Each to their own but the work burden versus the return needs to be analysed closely and compared to other potential management change returns within your operation. If you are selling on the spot market and not taking a forward position any price cycle as we are seeing now could leave your six month shearing program exposed to extra cost without associated returns.

David Fogg said: ‘Prices have come off but they are still delivering a good return and the normal break in the wool selling calendar may be quite timely to allow some form of reset’. Secondary, high VM and XB wools have taken the brunt of the falls.

My thoughts around selling wool are relatively simple: If you need the money meet the market and move on. If you are prepared to take a punt then ride it out, but from experience you may need to hang on well past the eight second bell in rodeo terms.

In general

I am struggling to understand why market reports are being turned off.

Yes the circumstances are unique but livestock and wool pricing has always been driven by the unforeseen.

Gatekeeping of information can be counterproductive, and every producer has a different reason behind need to sell and use of information.

As an agent it was always dangerous making the decision on behalf of your clients about “what price is acceptable”.

The information is retrospective in nearly all the reports so why not show what is happening? Is it because it is too hard to explain the change?

I did note last week the articles about live export and the pressure being bought to bear on financiers through the social licence aspect from animal welfare activists.

I feel is important to note there are still finance options available for this extremely important component of the Australian livestock industry and it is not all doom and gloom.

Never believe the radical groups will stop with live export if they can chalk this pressure up as a win.

When we come out the other side of the current virus crisis a strong supply chain properly stocked and funded will be very important for all end users and service providers.

Opportunities

Trading out heavy and replacing light to use grass

Northern light export steers and heifers

Breeding females

Merino sheep with a start in the wool

Taking a breath and letting things settle down

 

 

 

 

 

 

 

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Comments

  1. Mike Introvigne, May 5, 2020

    Adding the West Australian perspective to this article would prove worthwhile to many considering the number of sheep and cattle going East and the real potential for very tight supplies come spring

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