Markets

Chris Howie’s southern market wrap – June 2019

Chris Howie, July 3, 2019

Chris Howie from Agri Careers and Consultancy offers his perspective on southern livestock market trends in May, 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.

AS everyone involved in agriculture knows management of your enterprise is wrapped in many moving pieces.

Putting the weather and the animal husbandry aside, quite a few variables are out of the control of the producer, agent or end user.

If we look at the well reported impact of African swine flu, the knock-on effect is just starting to become apparent.

This in turn is creating a demand to fill the pork void with beef and lamb.

Looking at the red meat export figures for the last 12 months is evidence of this very large uptick.

Where will supply come from when the season turns is the elephant in the shearing shed?

However, on the other side we have the trade tariff standoff between the US and China (as well as EU and Japan tariff discussions) which is now directly affecting Australian agricultural export prices, especially wool and potentially beef.

Our trade of grinding beef into the US Burger market is a key component. McDonald’s have just released the results of their “fresh not frozen” campaign. In short, they used their quarter pounder as the pilot. Same period comparison they have sold 40 million more quarter pounders than 2018 and shown a market share improvement for the first time in 5 years. This in turn will drive a change by McDonald’s I expect.

My point is we cannot influence these decisions or actions or market forces yet being part of the Australian agricultural community, we tend to spend an abnormal amount of time worrying about them. It is important we stop worrying about [email protected]&t we can’t change and focus positive energy into what we can.

What is the most important part of your business? Producing the most kilos off your available enterprise in the most effective and cost-efficient way.

Spending your physical and emotional time doing this will pay dividends and provide a goal and a measurable sense of achievement to you as a producer and those that are involved in your business.

The adversity of the drought has seen a lot of ideas, adoption and practices forced upon producers and service providers alike. Without these trying times some of these productivity changes would never have gained momentum.

After a quick run through Dubbo, Parkes, Forbes and Wellington last week it has really hit home how dire it is in central NSW.

Available pasture/hay has become non-existent with the next run of breeders coming onto the market.

New season lamb and next years weaners have a long road without rain. The agents I spoke to all said much the same. Producers are changing what they do to manage the situation and trying to create cashflow. It is not an easy option but it is better than doing nothing.

Cattle

Light cattle are still very hard to place. Whether in Goondiwindi or Mt Gambier the reply was the same: “We want weight so we don’t need two winters”.

Classic example of this was Anthony Triggs, GDL, Goondiwindi with 500 very neat Angus steers at 220-300kg, average 260kg, for sale. 18 months ago we would have had everyone climbing over glass to buy them. Triggsy got them away at $3.20 but with lots of half starts and many phone calls. Anthony also said he is selling his cattle 50–70kg lighter than normal and many that should be for sale in Nov/Dec are going now.

Light heifers are still hard work with any under 200kg very hard to place. If anyone has feed run them like sheep.  It is amazing how they will reward you once the spring arrives with growth and weight gain. As with all areas when it rains prices will change in hours so have your finances set to be first in and avoid the price spike that always follows.

As commented earlier in the year about trends in June to August the heavy cattle are disappearing and the first signs of a lift appeared in late June. The cow job started to push with 10-20 cents in some yards and flat rates of $4.75 being mentioned or the brief appearance of $5 on the grid for cows.

Feeder supply holding up

Feeder supply seems to be holding up at this time with most feedlots a couple of weeks out and space relatively difficult to find. A lot of various spec and light cattle are being fed. Proper 400kg Angus feeders are in demand but very hard to find with rates of $3.30-$3.40 appearing.

Many feeders are dropping specs back to 360kg in search for numbers. July/August normally see feedlot supply tighten BUT feedlots are finding it very hard to secure roughage for rations and this cost may offset any significant upward shift for a bit longer.

Any autumn calving operations looking for sires the NSW bull season has kicked off with some great buying opportunity. John Settree, Landmark Divisional Livestock Manager based at Dubbo, said “many of the studs have cut their auction offerings which means potential buyers are seeing the cream of the crop. Those in are on feeding performance, structure and genetics with any bulls that were lacking already gone to works. Numbers of paddock bulls for sale are also limited as the feed situation has seen them moved off also.”

From experience if you have need for a sire, I know you will find some exceptional quality bulls that are very affordable due to the severely reduced cow numbers in the north. Technology and EBV information mean you can inspect without the driving time and be confident of your selection.

Sheep

What a great month for those moving lambs and mutton.

Not only have the prices continued to rise but through the adversity of the continued dry, feeding systems and opportunities have developed that otherwise would have not been thought about or considered.

I feel we will see a paradigm shift with lamb production following cattle feedlotting mentality over the next three years.

The numbers of breeder operations feeding lambs to a specification are growing.

Instead of selling a store lamb or plain mutton they are investing the time to confinement feed which has been cash positive.

Weight gain and wool is covering the feed cost plus a margin without any price lift.

Speaking to Michael Wright from Schute, Bell, Badgery, Lumby he said “the western division of NSW clients are looking at value adding what they are breeding to create positive cash flow.” This is an ideal example of agency sourcing and providing advice to loyal breeding clients.

Whether it be on best options for feeding, end contracts or the finance required.

It is important not to let the stars get in your eyes or greed warp rational business decisions though.

A couple of recent store lamb sales would make you consider the buy verses sale price. 28 kilo Merino lambs at $150 and recently some 30 kilo second cross lambs at $170 on farm.

I don’t know where the price will land but these lambs will start to fall into the potential new lamb season and perhaps a softening of price at some point.

Dressed weight pricing has broken all previous ceilings now with lamb consistently between $8-$9 but plenty of auction sales well above. Mutton is now solidly in the mid $6 range.

Our wool market has taken a bit of a pounding.  Speaking to Mark Dyson at Quality Wool and Livestock, the US/China piece is starting to bite top and garment manufacturers in a large way who import into the US. This in turn is directly hurting the Australian wool market through limiting demand. The sums still work out in the producers’ favour even though the price has eased 340 cents since this time last year.

It was pleasing to see the offload report for the Wellards live sheep shipment to the Middle East prior to the three month summer suspension in the rural media. I know it is difficult to promote good news in our industry but the result really shows how much we all strive for the best outcome. Perhaps these facts based on operational management, ship design and common sense can help build and drive good business discussion and understanding with others.

Opportunities

It is the time of the year to sit down for a day and map out what you want to do.

Don’t be scared to involve someone who may bring some different insight to the table. Sometimes fresh eyes see simple opportunities that are already available to your operation without spending a lot. Or a different way of approaching livestock breeding, trading or restocking. Remember you are planning for what you are looking to turn off next year, not next month.

At this time of the year females SIL / PTIC or with lamb / calf at foot are a no brainer. If able freshen and split or draft keepers out and sell rest later in the year. Perhaps rejoin.

Sheep in the wool are still a good two-way bet. The wool market has come off but it is still good business

Plain cows are still available if you have feed (be careful of droughted cows though)

1 mark females that can be freshened and reoffered in the spring

www.agricareeradvice.com.au

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Comments

  1. Neil Kirk, July 15, 2019

    A good overall report Chris. I agree with your remarks about central NSW, if anyone thought the drought is over go for a drive.

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