Markets

Chris Howie’s southern market wrap – October 2019

Chris Howie, November 6, 2019

Chris Howie from Agri Careers and Consultancy 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 and former Elders national livestock manager.

 

 

 

AFTER many years of talking about it I eventually took the time to go and have a look at New Zealand and meet some lamb, cattle and dairy operators.

The scale of some of the operations was quite staggering and the use of pasture combinations, grazing crops, animal health, technology and livestock production advice was viewed as an integral part of their operations. Converting grass to kilograms whilst factoring the seasonal pressures of feed, supply and demand.  It is impossible to compare the feed regimes with Australia – lots of grass compared to lots of acres. One operator trades over 200,000 lambs a year off grass with another doing 140,000 between their breeding and trading operation.

Grass-based dairy and beef operations are also looking at the end user requirements at the start of their programs – before the bull is introduced. One such model distributes semen to align to the end user needs. A significant difference in NZ from the Australian model was the alignment of supply from day one to the backgrounder or end market – lambs, beef or dairy calves targeting the set specification needs.

I did note however that the processor-driven programs in Australia are further advanced than NZ at this time. Around 2004 when I was at Mt Gambier one of the major beef processors introduced their MSA grid into the market. The returns were excellent if you hit the specifications and graded. However many avoided supplying because it “looked to hard”. Much the same as NZ, those that took the time to understand how to meet the requirements, preparation of livestock, breeding/buying of suitable types and how the animal was graded very quickly created an excellent return above the norm. At the time in Mt Gambier this allowed my team to create a point of difference in conjunction with the end user needs. It didn’t take long for others to follow but the benefits of the process have been long lasting in the management of dark cutters and transport preparation for a better result. Remember when we all started talking about weaning calves before sending them to the weaner sales in 2001 there was so much resistance, how things change.

Now we jump forward 15 years and look at what is driving the livestock industry and creating multi market access for the same animal. The processors have spent a huge amount of time, effort and funds developing international markets with the introduction of quality assurance, grass fed, breed specific protocols. Nearly all of the exporting processors – pasture assured, locational benefit, organic, breed certified this list goes on and all very good in their own right. The value of these programs internationally puts some real muscle and point of difference behind the demand for Australian product and producer end result. Yet how many producers, back grounders or agents have taken the time to sit down and understand what is on offer? What is required to meet the specification? How much return or flexibility is created? What is the end market? Why does the consumer think the Australian product is better than NZ, US, Brazilian, Indian or South African?

By understanding the detail of the programs aligned to what is being produced you can develop your productivity program to meet the end market needs and create a better return? Taking an hour to ask questions and seek information can deliver very large returns with very small change. The more boxes ticked by the vendor specific to the various species programs the more flexibility created around marketing of the end product for everyone involved.  Processors can then create point of difference and demand on volume aligned to their programs and high quality, premium brand marketing. Simple processes providing better returns and a more manageable risk profile through the supply chain. This can only be a good thing in my eyes. Yet it is impossible to leverage the opportunities at producer level if we – producers, backgrounders, agents – have not taken the time to understand what the various requirements are and how they create a mutually beneficial value proposition.

The sophistication behind processing now has developed to aligning slaughter days to output meeting the specific end user markets. Efficiencies created through coordinated logistics, improved boning/preparation processes to suit the carcass and plant utilisation are some of the areas continually managed by operators.

Supply however is a moving feast that needs all components of the supply chain to engage.

Irrespective of the season we are now heading towards a significant supply shortage in the south from the end February.

Speaking to Jason Andrews and Clyde McKenzie Elders Deni, the Jerilderie sheep sale on Friday had sheep being offered that are traditionally offered in the Deniliquin’s January sale. Pastoral sheep and cattle operations north of Pt Augusta through to the NSW western division are now down to a level that any form or rain will see all stock kept which normally would be sold – steers, wether lambs, cull females etc just to get numbers up again.

Bob Jameson from Bob Jameson Agencies at Inverell has a great philosophy, “Feed for profit”. Look at what sale stock you have in front of you, take into the consideration the time frames and pay a nutritionist or a Livestock production specialist to help do the numbers on cost and return. We all think there is a big upside in retaining and feeding towards April, May, June now that many producers have done so much hard work. Engage with agents, feedlots and processors about what they are looking for.

Using this approach look at the volume and risk model as well. If you are already feeding livestock towards the demand is it worthwhile buying some similar units to top up the number and create economy of scale for your effort?

I saw some refreshing pictures from Quilpie last week showing a flow in the Bulloo River and around Broken Hill. The storms have been a bit hit and miss but it is always good to see them appear in October in the North. Tim Salter, Elders Longreach said although reports were positive it was patchy with his area seeing 20 – 80mm over 15%, 5-10mm over 10% and the balance missing out this time. The southern agricultural areas probably don’t need a rain now as it washes out the stubbles and dry feed however the pastoral areas will accept anything at any time.

Will Dixon from Monaro Livestock and Property at Cooma said the area is just hanging on. There is need for a proper rain to run water and allow lambs and calves to be held. If not, Will expects a significant turn off of store lambs and calves in 4 to 5 weeks. Overall stock numbers are just becoming effected and seem to be about 25% down on normal. However, many of the mixed operations have unloaded the majority of their cattle already.

Markets

Honestly at this time of the year there is a market or sale every day in the south and the reports are coming thick and fast. Murray Arnels commentary in beef and sheep central and the various MLA/NLRS reports allow real time viewing as well as the A+ offerings from across Australia.

Mutton $5.60 – $6.20 is very solid and starting to move upwards and the potential for a lamb glut is now gone with December – January forwards already in play at $8 and better. James Tierney, RLA, Wagga Wagga said the lamb yarding’s are starting to soften with many producers electing to shear and hold now, however mutton continues to come because of price. Cattle are still appearing in quantity with more lighter types appearing. Demand for light cattle ebb and flow although heavy trade cattle and cow are still eagerly sought after.

Jaime Howie, Elders Trainee, Albury quoted a large run of 220 – 270 Hereford calves making $3.30 -$3.47 which indicates the market is starting to move towards securing numbers and lighter weaners creating some interest.

Jack Hickey, JM Ellis and Co, Hamilton said the season is about 2 weeks later than last year. Comparison for the week of the 28th Oct was 1800 lambs this year compared to 12,000 last year. Quality of the season may see some sale target complacency creep in if not careful with Xmas and New Year landing in the middle of the week and creating a disruptor for processing availability. Already some discussion around shearing to take lambs on. Calves are really starting to look good and better than normal. Potential upside on the much-needed weight for the weaner sales.

Coming demand

The African Swine Fever impact combined with the rapidly decreasing Australian flock and herd is going to play a significant part in the demand piece for the next 2 – 3 years. I have been amazed at how many farmers are not aware of the ASF implications. Previous articles in Beef/Sheep Central from Simon Quilty have been flagging the ramifications for five months now. Simon noted directly what the Chinese themselves have reported at a recent conference in Zhengzhou, attended by 5200 delegates as part of a larger article about the Chinese impact of the ASF outbreak:

“Professor Qiu stated that in the next 3-5 years China’s pork supply will be insufficient by 30-40% and a pork production gap of 15-20 million tonnes per annum would exist.”

In short, I believe the next 8 months will see new market levels reached irrespective of what happens seasonally. No sh*t Sherlock most will say. Meat demand internationally will have processors competing directly with restockers and backgrounding requirements as we saw at the Keith feature ewe sale in SA two weeks ago. If previous supply shortages are any indication it will also allow secondary and sub-standard livestock to make exceptional money compared to best quality. There is potential here for some to burn money because of non-performance by paying too much for below average stock – not condition but quality… In the areas that have feed, stubbles or irrigation – get serious about doing the sums and stacking some numbers for the April to July period. Now is the time to act.

Opportunity

  • Cows and calves
  • Spring lambs to supply into winter
    • Remember timing for them cutting teeth
  • Any strong, healthy plain mutton – especially in the wool
  • Feed for profit not for maintenance
  • Wodonga TAFE (RTO) 3097 – Certificate 4 in Agriculture – Service provider and supply chain AHC40116 – Next course November 25.

 

www.agricareeradvice.com.au

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