Chris Howie from Agri Careers and Consultancy offers his take on southern livestock market trends in March, 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.
Having covered large areas of SA, Victoria and NSW in the past four weeks it is becoming very evident the continued dry is now entering uncharted territory for many farmers.
The extreme wind event on April 5 has blown many areas completely bare of dry feed with hay becoming more scare by the day.
SA, Vic and NSW are waiting for a much needed break with relatively safe areas such as Victoria’s Gippsland, southern Wimmera/Lower south East of SA and Adelaide Hills joining the long list of areas with limited feed.
March/April are always the difficult time of the year to pull the trigger on buying livestock in the South. It is important to understand the difference between trading/restocking purchases and taking a punt.
Buying without enough feed to carry “cheap livestock” and hoping it will rain is taking a punt.
Some areas in NSW which received rain three weeks ago are now hoping for the follow up to capitalise on the germination and still relatively warm soil.
These rains saw an immediate change in the pricing structures for cattle and sheep although this did start to soften a week ago across store types whilst waiting for the next rain.
The rain event around the 19th and 20th through South West Queensland saw 100-175mm (four–seven inches) and it has allowed many in these locations the opportunity to smile. Again feed does not appear overnight but at least they can see what is in front of them. Prices in Qld and NSW have already started to respond on this rain.
I have spoken to a significant number of agencies over the past month and all are pointing toward the supply difficulties approaching.
It’s amazing how “guestimating” where prices will go does not enter the conversation but most importantly what can be done to safeguard lambing/calving percentages and get livestock up to weight to provide supply for processor, feeders and live exporters.
Other than rainfall the unknown maybe the impact of the African swine flu on the Chinese pig population, the numbers impacted are quite staggering.
This in turn may increase demand on lower value protein such as mutton over the next six months.
One agent in the Riverina stated “it is the first time I have not had a load for his regular carrier during Easter week”.
Difficult times in the bush impact all at different stages.
As with sheep many price movements have been localised in reaction or expectation of rain.
Early April saw upward moves of 15–30 cents on the back of rain in the south.
The AA Co special sale in Longreach jumped 40–50 cents because of the cyclone at that time.
The ECYI moving over 100 cents during a 2 week period early April was an example of the reaction speed influenced by these rains.
In the south once the weather bands moved through we saw the rates fall back on restocker and backgrounding cattle. Good steers still hover in the $2.75 to $3 range with special lines finding a little more.
Heifers have been a roller coaster with very fast spikes at the start of a week then falling away once those orders in the market fill.
Those that took a position early have seen some very good margins on resale through the Southern highlands of NSW allowing them to re-enter and support the market.
The renowned Gippsland bullock areas are very tight for feed and this as well as the huge cow turn off will see heavy cattle supply become very tight into the winter.
Supply will start to become very dependent on feeders across all types.
Conversation moves towards financing livestock
Agencies and Producers are now looking at the financial needs around a herd/flock rebuild. Across many parts of Australia the conversation has moved towards financing livestock in expectation of a winter break–breeders, restockers and traders.
Following the Royal Commission it seems the difficulty of making livestock fit into a spreadsheet or having the capacity to make them fit into the overdraft is putting a lot of emotional pressure on graziers.
I can only draw on my experience and suggest start the conversations now with your agent and financier to understand what is needed.
Then get your facilities put in place.
Reaction time is so important in the livestock industry and having the reassurance that you can move quickly because of this pre–planning will pay long term dividends for you.
The expected April price movement has started on sheep and lambs in the south.
During the early parts of April it was relatively volatile and aligned to areas where supply tightened in expectation of rain.
The underlying trend for the first week was relatively flat line.
Lambs lifted 30–60 cents south of Dubbo with NSW and Victoria leading the charge at close to 700c with SA following suit but 40–60 cents behind at 640–660. (much of this is freight differential).
The first winter forward contracts are appearing and it is very hard to assess where the prices may land this year.
Speaking to a lamb feeder at the football he has set his margins on cost and return and the lambs go when they are ready. “Being greedy can bring you unstuck. Sell and buy again as long as there is a quid in them.”
The store sale numbers have fallen away significantly with some sales cancelled.
Many producers are now holding a bit longer in hope of autumn rain.
We have seen mutton consolidate and start to move upwards in line with yearly trends however the mutton price question maybe a lot harder to predict.
We often see mutton move first when lamb supply tightens. During high volume lamb periods mutton is not the key focus for many of the processors.
When lamb supply and quality start to fall way mutton becomes the fall back to ensure plants continue to run as close to capacity as possible, hence the lift.
Even though the wool prices may have eased a little the returns are still exceptionally good and the combined Sheep, Lamb, wool enterprise is really humming.
- Sheep are still a very good value proposition even though prices have lifted significantly on mutton
- Light heifers still provide a three-way bet (Straight lines)
- Plain cows and older steers if you have feed – often just a freshen up provides a good return
- PTIC cattle or sheep
- Start planning your turnoff strategy for June/July/ August if you are lucky enough to have feed.
- Demand will cover all slaughter types this winter and it is important you have a target price and do not allow greed to damage strong relationships or miss the boat because a processor has closed for maintenance during short supply periods.
HAVE YOUR SAY