Markets

Chris Howie’s livestock market wrap – July 2020

Chris Howie, 05/08/2020

Chris Howie

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 very easy to be dragged into the negative media cycle based on COVID.

This in turns seems to create some tunnel vision or decision paralysis around problem solving versus opportunity creation.

We still have several distinct seasonal dynamics at play. Drought, season just holding, abundant feed. Rainfall will play a significant part around sale stock considering July in SA, WA and Vic was dry and frosty.

Victoria and NSW are providing us with significant destination opportunities which in turn is allowing prices for store livestock to hold.

Cattle seem to be faring better than sheep and lambs at this point.

However, the price correction for sheep and lamb is hinged on end-user ability to slaughter stock and sale of higher value product.

The demand for store sheep and lambs is still very strong and the marketing of stock being sold because of season is now more important than ever.

Season insights

Discussions with a number of StockCo colleagues has provided an update of seasonal conditions. In NSW Toby Hammond reports the season continues with some recording up to 40mm over the last two weeks. In contrast to six months ago the ability to grass finish stock is a huge relief. Old season lamb supply is winding down and transitioning to a steady flow of new season lambs. Agency enquiry has moved from trading prime stock to a focus on breeding/replacements. Many producers and agents have contracted lambs or fully sold and the recent market correction is providing trading opportunity. Speaking to producers and agents around Coonamble, Collarenebri and Walgett, the excellent rain has taken feed to the next level. It has also elevated risk on bloat and pulpy kidney with large areas of clover.

In Victoria Michael Phelan said another rain would be welcome after some significant frosts.  It has not been become too wet in Western Victoria with enough moisture coming through to set pastures and broad acre crops up. Central and Eastern Victoria has been wet. Around Shepparton, Euroa and Benella, it is just starting to dry out.  Yarrawonga and Corowa are looking brilliant with East Gippsland finally receiving good rains setting up spring hay and feed paddocks.

COVID is getting its claws into the ag sector, causing some angst.  Recent short-term closures of local lamb and beef processors has rippled through markets. Many producers and agents are eagerly looking to see what sucker lamb pricing appears. The current interruptions have prices taking time to find there level but feed in paddocks will provide options to hang on a little longer.  The feed situation is just starting to see cow and calf units put some bloom on which bodes well for the weaners sales in the new year.

In Queensland Angus Creedon seasonal conditions are varied with some areas receiving an average season and other areas well below on rainfall and re-entering destock mode again. Mt Isa to Longreach is really suffering. The next two months are generally the driest of the year in Queensland. The later wet seasons over the past few years has been evident with reduced and later weaning numbers.

This does however present opportunities when the season breaks up north in the form of PTIC females. Qld has witnessed large numbers of cattle heading south into NSW and this has helped maintain the strong prices. There significant demand in the north once there season returns to normality. Again females seem to be the trend.

SA report

Rodney Dix from Spence and Dix Agencies said the upper and lower south east are in excellent shape. Good early feed and excellent lambing and calving rates. This is providing producers the ability to tread water and not be pushed into early sale programs.

SA has both extremes – areas of year on year drought and other areas that will be looking to trade livestock on an abundance of feed. A rain is needed at present with some areas looking good but dry. Areas of the mid North and upper North are fading very quickly with limited paddock feed available.

WA Gerald Wetherall, GM Westcoast Livestock and wool. South West season is good, South coast through Esperance is continuing with dry year on year now and stock water becoming a real issue. The agricultural areas are hanging on but also need a rain. Central & East have adequate winter feed but without rain it will be insufficient to get lambs and cattle weaners up to heavy trade weights.  Concern about a short spring is starting to gain momentum with many looking at an early sale program. Without rain it seems WA will start another serious sell off. Quality store lambs and weaners with good runs of breeders not far behind will become available. Eastern states enquiry is still very strong and has helped underpin the WA store market.

Cattle

The cattle market has maintained its value with good contracts still being offered for feedlot entry weights and finished slaughter cattle. Well-bred Angus and their crosses are leading the charge on prices offered. Beef tends to be less reactive than sheep as there is a longer lead and feeding time which does allow many to ride the bumps utilising contracts. However export demand does drive price and yearly trends show that beef price starts to back off around September with the southern numbers appearing.

So much focus is aligned to productivity values with beef, yet we seem to treat marketing the final result as an afterthought. End users are aligned to various marketing tags – breed specific, branded product, assurance programs; grass, grain assist, grain. It is well worth taking the time to align yourself and discussing the benefits associated with this approach to marketing your sale stock.

NSW has become the powerhouse for demand on store cattle with an excellent body of pasture and crop. Females are very quickly becoming the flavour with cow and calf units offered on Friday with a reserve of $2100 making over $2700. I think some excellent opportunities will arise in early 2021 with large runs of joined females being offered allowing some destocked areas to get back into a full production model.

As Queensland get closer to the rain season from September onwards the demand for females will grow considerably and may well see the flow of cattle heading south to NSW do a 180 turn and have them heading back north.

 

Sheep

Ron Rutledge, Elders Victoria called to say the annual Hay and Jerilderie sales will be interfaced with Auctions plus for the first time. As we have seen with processors difficult times call for extraordinary measures and looking outside the traditional box is becoming the norm when marketing livestock.

Suckers are starting to roll in SA and the Vic/Riv with Paul Keynes, Elders Murray Bridge noting the first combined sucker sale with Nutrien will yard just over 3000 lambs. The season is running early through the Murray lands and Eyre Peninsula of SA with many new season lambs already being drafted off mum as stores.

The main chatter within the sheep industry is what are sucker lambs worth? Where can we buy runs of ewes from? What is wool going to do? When should we buy?

What do your options look like? Carry lambs onto heavier weights and shear them to utilise feed, sell as stores to capture early demand and rest ewes, look for trading opportunities to compliment your normal breeding program, cashflow lambs to meet financial commitments or draft out merino ewe lambs and target a special female sale later in the year? Main part is to make your decision based on the outcome you can achieve not hope for.

Spring  lamb supply looks healthy with good lambing percentages being touted in the southern states.

My advice on lambs is aim at getting optimum condition and weight into them without going above 30kg carcase weight. If they are as good as you can get whilst on mum sell them and move on. However, if you have feed and are prepared to shear, take the opportunity. Main thing is to make a firm decision and manage your delivery window towards the end result you have set…

Crystal balling on price – $7 / $7.40 now and progressively softening towards low $6 range once we get into the swing of the season. I cannot see processors expanding kill volumes until export demand starts to reappear.

Store lamb pricing is very well suited to grass fattening at present as it is a low-cost option. Numbers still need to recover in the North. Spring lambs will be excellent in NSW but not in overwhelming numbers. I think this makes the new year supply arrangements look promising if we can return to normal. Lot feeding lambs normally starts to ramp up from October when shorn lambs start to appear. Competing against the grass operators over the next 6 weeks may make it difficult to create a positive margin.

When selling older ewes take the time to mouth them properly – Broken or unsound mouths to processor at price offered, all sound females should be targeted at restocker markets. Merino ewes are the backbone of ewe numbers and well worth preparing properly.

Agricultural area shearing is underway and August will start to see ewes appear. Buy early and feed them some hay – don’t wait until September / October. If you are buying lower quality ewes because of price do yourself a favour and put better quality rams over them.

Stud chat – The Southern on property ram & bull sales will need to review how they market their offerings in the last half of the year. Allowing buyers who cannot attend on the day the opportunity to bid is a priority. The early sales in NSW have tested social media and electronic platforms being interfaced to provide some excellent results.

Attending the SA South East Merino breeders field day at Keith I was really impressed with the quality of the rams. SA Ram sale calendar 2020  Traditionally many are now set for their on-property and the Adelaide show sale. SA is still holding out against COVID and on property sales are still scheduled. It is a credit to the studs on how they have prepared sale sires and continued to look at the positive aspects of the combine wool and meat model. Speaking to Geoff and Bernadette Davidson at Moorundie Poll merinos. Geoff said his focus on feet and the ability of merinos to handle higher rainfall whilst producing more meat on an early maturing lamb has helped take his offering to the next level. The 160 sale rams I saw are a testament to this approach.

Major annual networking events such as the Australian Sheep & Wool Show in Bendigo and Sheepvention , Hamilton have been cancelled. It may not seem like much, however many overarching grower strategies and direction often come from these events. It is important we continue to network and create positive business discussion in lieu of these events.

Looking forward

Some of the decisions to be made in areas that now have feed are about short-term trade versus long term breeder purchase. This decision is made at your kitchen table. Again, be firm on what you decide and do not get drawn into “chasing the ball” which invariably see margins drop and costs go up.

Accurate livestock description has always been the sign of a good agent or producer. With the current situation requiring over the phone / social media / photos; the more information the buyer receives the better it is for the vendor. Don’t over quote or paint a rose coloured picture – quote them as they stand not what you think they could turn into.. Make sure to mention grass seed / burr, dentition, frame & liveweight, condition score, bloodline, animal health status and wool quality.

Nothing beats getting together face to face however as we progress it seems our next goal is Beef Week in early 2021, might be just a nice milestone to indicate the worst is behind us if we can get on top of our current predicament by that time.

Opportunities

Store new season lambs

Buying ewes in August

Contracting feeder / slaughter cattle now

Cow and calf units

Growing young females out

Upgrade sires

 

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