Agribusiness

Chris Howie’s livestock market wrap – May 2020

Chris Howie, June 5, 2020

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.

 

THERE are a multitude of opinion pieces covering a huge range of topics every day in Australian rural media.

In the old days a stock agent was the source of information followed closely by the Country Hour and rural newspapers on Wednesday and Thursday.

Then the internet appeared and the ability to find and distribute information became much easier and everyone started the “I can do it myself” conversation.

The “remove the middleman” mantra became quite loud.

However, the marketing work required was then transferred to the producer or group who found that marketing takes considerable time and can lead to some significant opportunity and price losses if trying to run your farming enterprise at the same time.

I am starting to observe a drift back to those “Agents” that can gather information based on facts and events.

Forming this information into usable opinion and options without become a gatekeeper is a skill well worth developing or engaging.

Often in agriculture, the information available is very specific and nearly useless if not put into context. What happens at an individual saleyard does not make that much difference in the scheme of things. Many times, the producer only has one piece of the puzzle directly related to their operation, State, or season. This means the decision made using that information is correct, however, without the important end-user block, the decision made may miss the mark completely.

When selling sheep at $200 – $300 and cattle at $1000 – $3000 per head, missing by 10 percent adds up to a lot of money.

Price change discussion used to be supply, demand, foreign exchange and market access. Now we are seeing prices go against trend, with current world events completely changing demand, and supply chains being broken and politics using trade agreements as bargaining chips in a game much larger than the Australian agricultural industry.

However, everyone must eat and the ramifications seem to always land back at the farm gate. Many of the strategic articles circulating are pointing  towards food and water security issues in many countries. I think this is going to become the norm more than the exception over the coming years.

The ability to pull what is happening together in some form of forecast is by no means perfect or iron clad. When you find the individual or company that can provide this to you, do not let them get away and treat their fee as an investment in the success of your business.

Feed availability has given many the opportunity to jump back into the market. But what should we buy to make a quid? It is easy to get tangled up in the hype of the media about China but the world is a big place and as we have seen with barley, one door closes and the Indian door opened.

Take the time to think about what circumstances today will impact your operation in six months time?

Number 1: What is the quality of your feed and water in 6 months time? – remember the heat in October… Form an opinion, create a plan and attach a value to it. After speaking to a long term trading client and friend in SA his words were quite sound. “Be careful of the excitement surrounding the current prices and do your home work on what you are buying and why. Make sure the sums make sense and be prepared to shop along instead of fixing a time to make the purchase. Also manage your property according to its production capacity. Are you in pastoral country where numbers produced create the income or are you in an area where kilos produced is the money spinner? Why sell an 8 week old lamb at $120 if you have the feed to turn it into $220 or a 200kg steer at $1000 if you can take it to 450kg?

Peter Cabot, Nutrien Wagga Wagga, said his older clients cannot recall an autumn feed season as good as they are experiencing now through the Riverina. With store steers at $5-$6, heifers $4-$5 and store lambs from $5-$6 vendors are smiling. Bull sales were also up $1,000 – $3,000 on average which surprised a few considering the number of cows sold. These prices were achieved with a number of sales moving to electronic offering because of the restrictions. A few myths may have been dispelled on best stud marketing methods this year?  Overall a very positive step into winter.

Sheep

Buyer beware.

I will add a small warning to those selling multiple foetus SIL ewes using marketing terms of 140 -170 percent in lamb. Don’t do it!

The best you can achieve with sheep is 100 percent. Then it is a number of multiple and single foetus ewes in the supplementary information. A lot can happen between sale and birth – toxic weeds, pregnancy toxaemia, bad water, foxes, eagles, cold weather, poor scanning. My suggestion is stick to the facts do not try and paint a rosy picture you cannot control. As an agent the disputes over the number of lambs/calves that hit the ground form the biggest claims for PTIC and SIL. It normally happens months later when the contract is well and truly settled. Always have a signed copy of your scan / preg test certificate on file.

Breeding flock opportunity – Many producers will continue with the normal program however some are looking to create additional cash flow. Sheep tend to lend themselves to this more readily than cattle. Some times it is worth considering your flock and how you can create some value from your investment. If you are attached to your breeding this only happens in times of forced sale because of seasonal conditions. However, if your ewes are designed to create income consider this. Best sale value ewes are the 3- and 4-year olds. Do the sums on unloading these now into a very strong market and then replacing with 5 and 6 year olds in the spring buying them off shears. Join and lamb the purchased ewes down (or sell SIL), keep the ewe lambs, sell the wethers and punch the old girls out autumn next year. Just a thought but remember the biosecurity piece.

Speaking to Callum McLachlan, Jumbuck Pastoral about some of the changes he has made around managing sale stock from his families remote sheep stations in SA and WA. Feedlot preparation and joining have definitely paid dividends this year compared to selling directly off shears in March which has been the norm. His sheep at Nyngan on adjustment are doing well and he has been tossing up taking home or selling. The current demand for ewes is very compelling and Callum has decided to offer 3500, 5 year ewes, Feb shorn running with Gunbar merinos in late June after scanning; through Elders.

Dean Hubbard is the new Livestock and Wool manager for Elders in WA. Dean said the season has probably seen numbers oversold for the time of the year. Processors are looking at available stock and winter shut downs may start to appear in the near future on the back of limited supply with some international orders being impacted. WA will enter the live export embargo this week stopping trade into the middle east. Recent rains have provided some hope to the WA producers and may slow the numbers of joined ewes being offered. Lambing dates are also a determining factor in trucking from now on so buyers in the east need to be mindful when buying joined ewes. Inquiry is increasing for larger lines of 1st draft young ewes being offered in WA from the East.

Goats

Tony White, Gateway Livestock Pty Ltd at Dubbo, handles a lot of goats as part of his agency and I asked him for an overview. Tony said “goat supply is tight with rain in pastoral country spreading mobs out and reduced kidding from the drought. Demand from Asia is good although USA very poor. OTH prices softened as exporters who normally sell into USA offer to Asian buyers to clear frozen product. Available shipping and freezer space are also an issue for some destinations. Domestic – light goat enquiry is strong for seasonal / religious festivals, also food service enquiry is starting again next week. Current pricing generally $7.00 / $8.00c / kg OTH HSCW”. Make sure you keep informed on some of the orders. Drafting out the nannies can create extra opportunities from time to time.

Cattle

The northern light cattle prices hit a low over a 2 week period early May which activated southern interest. They have now recovered for export models around $3.20 steers and $2.80 heifers but the opportunities opened in that small window have allowed the grass based players to stay in the market place. The grass enquiry has expanded from young light cattle to cow and calf units as well as some heavy improver cattle also.

Cyril Close, Topex Roma, said the southern competition is really setting the pace at present. Buyers from the New England, Central and Western areas of NSW are operating on all types to take back onto crop and pasture. Cyril also said the grassed areas in Queensland grew very quickly becoming rank with the energy levels being very low which will see a need for livestock supplement during the winter.

Opportunity mixed with caution – We are continuing to see the Australian prices driven by availability of grass. Some closing for a week and many processors reducing kill is a direct result of this widening price gap and physical numbers available. The US processor shut downs have impacted the US domestic supply by at least 30 – 40 percent which is creating a big upside for the Australian beef.

However there are opportunities available. Freshening up plainer cows has always been a good money spinner but the window for opportunity is normally very narrow. By the time you buy them and freshen them 60 – 70 days is gone. When the US processors re-activate I consider we will see a very fast reset on export cow beef. Don’t be scared to lock cows away but also look for some forward pricing security. Continuity of supply is always front of mind for any processor, feedlot or exporters.

Angus Creeden, Stockco at Rockhampton, reported on North Western Queensland after speaking with a few agents over the past week. “East of the channels taking in Longreach, Winton, Hughenden, Muttaburra have had half a season that has been patchy but most have some feed to get through to the end of the year with reduced numbers. The rain two weeks ago has spoiled a bit of the Mitchell grass after the grasshoppers went through, so not the best result. Agents reported a number of clients at 50 percent de-stocked already. Most of their dry cattle are sold and now moving large numbers of cows and calves. Weaners are late this year due to the dry last few years and will start hitting the market in the middle of July.”

Following my earlier comment about electronic bull sales – Trust has always been the biggest hurdle when buying stud sires remotely. How good is the description? It seems the need to find a solution has broken this barrier now and we may well see a new industry norm going forward with many studs.

Quote, Benjamin Franklin “Out of adversity rises opportunity”

Foot note about a good bloke: NSW stud stock – Andy McGeogh, retired after 43 years with Elders. When I was a young manager at Inverell in 2000, Andy was of great assistance and counsel for me in a new area with a significant stud business. Ever ready with advice and knowledge, always at a sale with an order to assist and a flair for auctioneering with the twang of a Major General attached; and a great sense of humour..  andymcgeough1@gmail.com

Opportunities

Cows and calves from the north

Cash flow your 3 – 4 year old ewes

Older plain steers that you can hang some weight on

Store cows on crop

Drafting mixed mobs properly when offering for sale.

Continue looking at opportunities from the west.

Start thinking about forward contracts for July / August / September deliveries.

Mentoring the next generation

 

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