A significant offshore investor in one of the nation’s largest pastoral companies suggests in its annual report that the Australian beef industry is in good shape in terms of international market prospects.
London Stock Exchange-listed MP Evans is forecasting a bright outlook for Australian cattle prices, even after falls this year, as the diversified agribusiness group unveiled a 62 percent jump in earnings this week.
MP Evans is best known as a large international investor in oil palm plantations in Indonesia and Malaysia, but it also holds a 34.3pc stake in privately-held North Australian Pastoral Company.
The group’s performance is heavily dominated by outcomes in the palm oil industry, but raised gross profit for its latest financial year (ended December 31) by 19.1pc to $25.8 million, lifted by rises in both oil palm prices and production, and cattle returns, according to AgriMoney.com
MP Evans plans to lift oil palm production to 500,000 tonnes by 2015 as its new plantations mature. The company apparently does not yet participate in the ‘cattle under palm’ projects being fostered by the Australian live cattle export industry.
Concerning its other Asia-Pacific agri-investments, MP Evans chairman Peter Hadsley-Chaplin forecast more prolonged firmness in Australian cattle prices, noting "growing demand in Asia, and the continuing decline of the US cattle herd, a major export competitor to Australia.”
These dynamics would appear to indicate that the medium-to-long term outlook for Australian beef cattle markets remains positive, the company’s annual report said.
The comments follow a decline in Australia cattle prices, as measured by the Eastern Young Cattle Indicator, down 48c/kg so far in 2012 to 371.25c yesterday, as well as year-on-year.
MP Evans quoted Rabobank in explaining the decline in price as being due to "subdued consumer sentiment owing to economic issues" – factors echoed in the US, where worries over domestic beef demand sparked a drop of 10pc in Chicago live cattle futures between the start of March and a low last Wednesday.
However, Rabobank pointed out that "good feed conditions and restocker activity" were keeping Australian prices well up on the five-year average.
National Australia Bank had also forecast a bright outlook for prices, the annual report said, predicting "ongoing strength through 2012, if not by the 12pc the market enjoyed last year, as measured by average annual values.”
Helping to support prices was the expectation that global beef production would contract for a fifth consecutive year in 2012. This was likely to see price rises for beef among Australia's key competitors, particularly the US where Australian export prices have actually increased through 2012, MP Evans said.
The company reported a profit up 78pc to $4.23 million for the year from its 34.3pc stake in the North Australian Pastoral Co cattle business, helped by a rise of 55pc to 57,200 in the number of animals sold. These are understood to be preliminary figures, as the NAPCo board is yet to sign-off on final 2011 yearly results.
As background to this, NAPCo invested heavily in buying grower cattle in early 2010, to make use of an abundant feed resource on its Channel Country properties after the breaking of the 2008-09 drought. The company bought about 14,000 grower trading cattle at good prices in early 2010, most of which were turned off as heavy grassfed bullocks during the 2011 reporting year. That was basically a first in NAPCo’s 120-year history, driven by the impacts of severe drought in the 2008-09 years leading to a sell-down of big numbers of breeders and weaners.
The company repeated the exercise on a smaller scale in early 2011, following another strong summer season, buying a further 7500 trading cattle, but on a much dearer market. Most of those are still being grown out, and will be sold as grassfed ox later this year.
Despite the extra cattle sales during 2011, the size of the NAPCo herd rose by 1700 head to 195,300 head during the reporting period, the MP Evans annual report said.
"NAPCo enjoyed another excellent year, as a result both of widespread rainfall across its properties, giving rise to lush pastures and good weightgain, and of firm cattle prices throughout the 2011 year," Mr Hadsley-Chaplin said.
MP Evans at one point owned cotton-growing interests in Australia, and a cattle property of its own, centred around the St George district in western Queensland. When it exited the cotton industry, it took over some other English shareholders’ interests in NAPCo, growing to become a substantial shareholder.
The company is listed on the secondary board of the London SX.