Markets

Chris Howie’s southern market wrap: Weaner sales better than expected

Chris Howie, January 31, 2019

 

Former Elders national livestock manager Chris Howie offers his take on southern livestock market trends in January, 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. 

 

SPREADING risk is an important factor with any operation. If you start to plan now on the next 12–18 months using the available information, and knowing what you want to achieve, how much it will cost and what price you are prepared to accept, all of a sudden producers using good marketing advice can concentrate on what they are really good at.

Managing feed to produce the maximum number of kilograms. Producing, selling and buying livestock are like playing any sport – Netball, cricket, football. Fast on your feet and don’t get caught daydreaming or becoming indecisive. Because it was a good decision last year does not mean it is this year. A decision made is far better than no decision at all if you have a plan. Adapt to change of season, continually asses inputs to understand your ROI or delivering to the specification you have committed to with a contract.

In the southern part of Australia, September to January are the main turnoff times for livestock. The annual calf weaner and 1st cross ewe sales take place followed by store lambs and the joined heifer and ewe sales flowing into February.

It is very apparent that other than the Lower South East of South Australia, Western Districts of Victoria and Wycheproof/Birchip after a significant rain event, that the pasture and stubble feed is limited and the heat is reducing the quality.

Hamilton weaner sales

The first round of annual weaner sales is always a time for speculation on price and demand. Considering the lack of northern rain most thought $3 would be the calculated norm with heifers being difficult due to feed availability and speculative backgrounding trader demand being limited.

As it turned out the majority of sales performed better than expected with feedlots, live export and a Tasmanian order underpinning demand on the heavier weaners. The large volume Landmark Global export order kept a floor price during the sales and many producers and agents have congratulated them for their support during this sale series.

Without going into special lines, colour or EU, most steers in feeder ranges made $3 – $3.20. This saw backgrounders having to try and secure lighter weight range steers with the prices of $3.10 – $3.30 in most cases. The knock on effect was that heifers became the fall-back position and instead of $2.50ish being the result better styles ranged from $2.70 – $2.90 cents per kilo.

Joined female sales have been a bit erratic with Laryn Gogel at Naracoorte quoting “expectations for the female sale were $1400 – $1600 and it was a pleasant surprise to see buyers continuing to upgrade their herds with higher prices ranging from $1600 – $1800 with the Nampara regular run topping at just over $2000”. Matt Tinkler at Albury said “the joined female sales are becoming a little more difficult. Repeat lines of quality heifers are continuing to attract good money with a Landmark client obtaining over $1900. 500 kg quality heifers ranged from $1400 – $1600 yet the 18 month old models were a difficult article to place with most at $1100 – $1300”

I will preface this piece with a couple of important points. The sheep, wool and lamb enterprise is the best return on investment at this point of time. Bit of extra work but a way better income. When it rains sheep will provide a much faster cash flow proposition than other enterprises. Wool growing breeds love to pay the bills for you because when you feed them they continue to grow wool to repay your investment plus more. The price of wool makes running wethers a low cost option with a good ROI.

With the difficult spring many lambs were sold at lighter than normal into light processor orders and backgrounders. The significant forward contracts in October and November for lambs have helped many producers/ feedlots and traders put a plan together around feed and cost vs return. Best contract I saw was $9.00/kg. This in turn has helped processors and supermarkets secure numbers for continuity of supply.

At the start of the season we have seen lambs exceed $10/kg in some sale yards. In late winter early spring if you have lambs ready to go this is good business as the market is finding its level. As the season progresses saleyard reports continue to talk “top” prices, however normally only for 1 or 2 pens and not necessarily what other producers have to offer. Similar to betting on the horses, many only hear about the wins and not many speak about the lost opportunities.  Pre Xmas I was at one saleyard and saw 1000’s of lambs which could have been forward contracted for $8.00 or better sold on the spot market for estimated $5.50 – $6 plus skin at an estimated 24 -26kg. They were excellent quality, hard as a kitchen table, well shorn and I asked a passing producer why they were even there? The response was “ that’s what we do every year and I thought the prices might hold on for another week”

The pastoral areas of SA, Victoria, NSW and more and more the WA sheep producers are considered the engine room for supply of females to the Eastern states inside country. Whether a producer buys station ewes or not they form the volume core that inside sheep use when comparing quality and leverage price from. The NE of SA through to Walgett have sold ewes to a point that some are now completely destocked and many others are down to 30 percent – 6000 breeders instead of 18,000. Peter Cabot, Landmark Wagga Wagga relayed the older clients have never seen it as bad on the feed and water front. Speaking to Ron Rutledge the scanned lambing percentages north of the Murray are hovering around 40 percent with many stations lower again.

Visiting Deniliquin, Hay, Jamestown and Wycheproof sales have been the source of many conversations on how can someone pay over $300 for a ewe. The 1% that makes the difference is understanding the price and the return. Kevin Thompson at Wycheproof lives and breathes running the slide rule over sheep profitability. “Ewes and lambs or SIL ewes allow you to calculate return very easily as the lambing is known. 120% lambs at foot or 100% scanned plus fleece in the first year on a quality ewe brings a $366 ewe as achieved at Wycheproof this year back to $150 with another 5 productive years left. Even if you leave her value at $170 it is still good business.”

All of the above does however pose the question of how producers are looking at their breeding / trading program, target markets, pasture management, livestock production advice, financing, sale program and kilos produced this year versus last year – Not how many head but how many kilos!!

It always rains after a dry spell and having your financial needs in place with your bank or short term livestock finance such as Stockco will allow you to react in real time, not delayed whilst waiting for approvals and documents. Livestock production advice can help you improve kilos turned off the same amount of hectares with some minimal changes and input costs. The MLA have a raft of calculators that can help you determine the inputs and forecast returns on sheep and cattle.

For those with a plan there are some very real opportunities appearing between now and March for both cattle and sheep.

We should not treat a good sale as “lucky” but as the end result of a good plan well executed.

Some opportunities to watch over next two months:

  • Light weaners or cows, but feed reserves are needed to make these work at this time of year
  • Store merino lambs: Improve and shear. Make sure you know their age to avoid teeth cutting.
  • Merino ewes with a bit of skin: ideal money turners. Join and shear. Sell in June/July

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Comments

  1. Ross Keane, January 31, 2019

    Good article Chris, very good summary, Many Thanks

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