Chris Howie, Stockco business development manager, 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.
THE current recovery of the southern feed situation has been nothing short of exceptional.
Areas that were so barren and you would wonder where the seed would come from, are now experiencing one of the best feed seasons ever, from the New England in New South Wales, through to the south-east of South Australia.
I understand there are still areas that have missed the rain, but the map is slowly filling in.
David Fogg, Elders SA wool manager said the north-west from Port Augusta to Glendambo looks good, but further out it starts to become patchy. The north-east pastoral area of the state has missed out again and is still drought-affected. Graham Fullgrabe from Sharp Fullgrabe & Co in east Gippsland said Orbost, Bairnsdale and west is well-set for feed. However, the Monaro through Cooma is very bad with large numbers of stock moving prior to winter. Eden, Bega and the surrounding areas have turned overnight, with many of the pastures being summer-based grass and the cold blast will very quickly see pastures disappear. The high country around Omeo and Benambra has winter grazing crops in, but these are targeted at the calving and lambing windows.
Will Jennings, Paull & Scollard Nutrien at Albury, said following the bush fires, the country is shaping up to be a fair season. Early heavy rainfall in northern NSW provided the fire-affected areas around Corryong with destination markets. Processor demand allowed vendors trying to destock quickly due to lack of fencing and feed opportunity to sell at fair rates. With another 100mm of rain over the last few days, vendors are not needing to feed livestock and have focused on improving pastures and winter crops to re establish quality feed.
Recent rains right through the southern agricultural areas have seen tractors appear everywhere like moths to a light, with sowing a priority with the warm soil and moisture — happy days.
Availability of feed is driving the store markets to new levels. Many have sown grazing crops on the first rain and these have had perfect growing conditions with warm soil and timely rainfall. However, this is creating the quandary we are now looking at. The store market and the meat market are at polar opposites.
Paul Leonard at Thomas Foods International said it is easy to focus on the negatives at present, but there are a lot of positives appearing.
Paul said with the feed season, he is hearing good lambing and calving rates being reported. This also allows sucker lambs to appear in prime condition July/August returning to traditional supply timing. Processor demand in spring will be strong with chains returning to full capacity.
Government support for airfreight has allowed light lamb to be exported again, which has shown an immediate price impact. It was interesting to hear the main end user of lamb racks is the cruise ship industry followed by the US food service industry. Quality restaurant grade cuts are now in plentiful supply, with secondary cuts becoming the cost-driven “go to” customer focus.
Heavy stock prices are now feeling the international slowdown, with lambs following a trend a little later than cattle. The domestic weight ranges are not being impacted quite as much. Although, as discussed in a previous article, I would expect to see grid pricing start to tighten up on extra heavy prime stock suited to export markets.
A South Australian meat wholesaler said the quality of meat on offer domestically is excellent, with prices easing significantly for high quality cuts. I would suggest it is a great time to fill the freezer with beef and lamb.
How to use the feed
This poses the question of what to buy, considering the end-user market is under such pricing pressure, yet the residual effect of available numbers following the drought is still a major player. My thoughts are look at the supply needs in 6-9 months time. Excess meat on market in cold storage and limited demand have the next few months well-covered. Reactivation of the hospitality trade will be the driver on utilisation of this over supply.
I suggest when hospitality re-opens the demand will be significant and could indicate a very fast swing from over-supply to a supply shortage. But when will this happen?
Considering the moving parts if buying livestock, I would be targeting lighter store stock or breeding females that you can carry through the current situation. Ensure you have at least six months of feed in front of you to allow this supply/demand bump to be ridden out. This may mean buying a few less, but doing a really good job on them.
Store sheep market is still rocking
The store market is still rocking along with $444 received for some joined first cross ewes and store lambs still ranging from 550-650c/kg liveweight. We all like to read the big prices, but be mindful these are often exceptions and most of the offerings average considerably less.
Sheep and lambs are still coming from Western Australia and look like reasonable buying even with the freight component factored in. Scanned in-lamb Merino ewes in large drafts are landing home in the eastern states for $250-$270. If you are in the market, take the time to look at the comprehensive sale reports on offer. Especially AuctionsPlus, considering the volumes being offered online from all over Australia.
Tim Drum, Riverina Livestock Agents, Wagga Wagga, said heavy export lambs are selling at around 750-800c/kg carcase weight, although extra heavies 30kg-plus are starting to struggle on the grids, Trade lambs at 860-920c/kg cwt and light airfreight lambs have eased a little, but have been making 900-1000c/kg cwt. Mutton remains strong with prices at 600-700c/kg cwt and the odd sale higher. Tim also mentioned supply is starting to taper off quickly, with limited numbers left in paddocks.
Crossbred lamb skin prices are under extreme pressure, with some disposal fees appearing. Merinos with a jacket have been impacted by the fall in the wool prices, but are still providing a return depending on staple length and vegetable matter content.
Moving into winter, we often see sheep and lamb processors close for annual maintenance during low supply times. If you are a producer, be mindful that we are starting to see shifts reduced at some works because of limited numbers, which can quickly change demand and subsequently prices.
With the current feed situation, the supply of stores moving into spring may well be impacted, with many being in prime condition and carrying weight. This in turn may see some of the store and lighter orders prevalent over the last three years find supply difficult to come by.
Are wool sale methods playing into buyers’ hands?
Watching the wool market, the virus impact internationally has created the perfect storm scenario with processors in lock down, retail closed and consumers without money. This seems to have moved wool from an extremely coordinated and unified sale process to a multi mix of sale types, spread offerings and drivers.
Sale methods running at a tangent might well play into the buyers’ hands if not careful. Divide and conquer buying patterns appear very quickly in this type of environment.
Wool supply is designed to flow through the system, allowing volume to offset small margins at the broker and exporter levels. Once it is retarded in any way, the cost base, such as warehousing, starts to impact the system.
Wool producers have developed shorter shearing timelines, eg 8 months instead of 12 months. This seems to work well if the seasonality – cropping, grass seeds, lambing etc — can be managed. Recently, six-monthly shearings are being advocated, as they fit easily into a seasonal spreadsheet.
Each to their own, but the work burden versus the return needs to be analysed closely and compared to other potential management change returns within your operation. If you are selling on the spot market and not taking a forward position, any price cycle as we are seeing now could leave your six-monthly shearing program exposed to extra cost without associated returns.
David Fogg said “wool prices have come off, but they are still delivering a good return and the normal break in the wool selling calendar may be quite timely to allow some form of reset”. Secondary, high VM-content and crossbred wools have taken the brunt of the falls.
My thoughts around selling wool are relatively simple: If you need the money meet the market and move on. If you are prepared to take a punt, then ride it out, but from experience you may need to hang on well past the eight-second bell in rodeo terms.
Cattle export reset but opportunities in the north
Feeder prices have held up till this week and are hovering around 380-390c/kg for best types. Live export in the north has had a big reset, with a reduction in ships and in price, from the mid-300c/kg back to high 200c/kg. As previously mentioned in Beef Central, this has allowed processors and grass-based producers to gain access to numbers.
Graham Fullgrabe, Sharp Fullgrabe at Bairnsdale said there are good trading orders around the east Gippsland area, although not much joy for short-term winter fatteners at present. Cow prices are holding and showing good returns.
Sam Bartlett, Adcock Partners at Quilpie, told me the river country is excellent. Producers are currently tossing up whether to hold cattle and fatten further or to sell and buy in lighter stores and carry them through.
There is a good conversation to be had and considering the live export blip, opportunities in the north are creating opportunities to purchase Brahmans in the 250-320kg range; steers and heifers to put on grass.
Established processors are continuing to operate in the south, with grids reasonably stable, although as we have seen, this can change quite rapidly due to international influence. Some newer processors who are supplying developing export markets are becoming very selective on quantity required and in turn, this has seen processing days reduced some weeks.
Why are market reports being turned off?
I am struggling to understand why market reports are being turned off. Yes, the circumstances are unique, but livestock and wool pricing has always been driven by the unforeseen.
Gate-keeping of information can be counterproductive, and every producer has a different reason behind need to sell and use of information. As an agent, it was always dangerous making the decision on behalf of your clients about “what price is acceptable”.
The information is retrospective in nearly all the reports, so why not show what is happening? Is it because it is too hard to explain the change?
I did note last week the articles about live export and the pressure being bought to bear on financiers through the social licence aspect from animal welfare activists.
I feel is important to note there are still finance options available for this extremely important component of the Australian livestock industry and it is not all doom and gloom. Never believe the radical groups will stop with live export if they can chalk this pressure up as a win.
When we come out the other side of the current virus crisis, a strong supply chain properly stocked and funded will be very important for all end users and service providers.
Sheep and beef opportunities
Trading out heavy and replacing light to use grass
Northern light export steers and heifers
Merino sheep with a start in the wool
Taking a breath and letting things settle down