Markets

Chris Howie’s southern market wrap – August 2019

Chris Howie, September 3, 2019

Chris Howie from Agri Careers and Consultancy 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 and former Elders national livestock manager.

IT is a very easy to give advice after the event –  whether it is on sport, politics, business, share prices, livestock, wool or  grain, and on it goes.

Planning and looking forward using seasonal trend/price indicators as marketing tools is in all of my articles.

Irrespective of type, quality, weight, breed, micron or location; when the prices are good lock some away.

If they get better lock some more away. The overall average is what puts money in the bank.

Then when a “Trump factor” appears you have some breathing room to devise the next plan.

The most disappointing piece of commentary I have seen recently is around our wool growers. Nothing to do with internal politics, but simple marketing of a great product. In a previous Sheep Central article Mike Avery voiced frustration that less than two percent of the clip has been hedged forward to counter price volatility – I would say to capture a fantastic price. I am dumbfounded that the opportunities available since the 2015 lift from 1000 cents to 1300 cents in a matter of weeks to top at roughly 2367 cents in Aug 2018 have not been taken as a great opportunity to lock some part of a wool clip away year-on-year. Forwards available in March 2019 for August were still at 2000 cents.

I am by no means disregarding a howling drought, but with a forward-pricing mentality it is very simple to assess the cost of feeding sheep versus the wool return. Many growers have a very intimate understanding of how their wool clip performs. Historically, they can tell you the years it was finer because of feed, or tender because of a season break. Using a good wool broker and pulling this information together, most wool producers should have had at least 25pc of their expected clip locked away. It is time for the wool industry to capture the good times and manage risk none of us can control. Every wool correction has been inflicted by overseas issues – all without warning.

Lambs: We seem prepared to say what price is “not enough,” yet who can tell me what lambs will be worth in October–December? How much will price and quality change on the back of a hot week? How many lambs with weight are out there?

Here is some free advice for lamb producers: If Chris Howie had 2000 lambs (I wish) which he normally sells from mid-October to early November, this is what he would be doing today.

Work out your weight ranges for the top 500 and put up on AuctionsPlus as a forward delivery contract – so simple. Now you will find out what the market will pay instead of hoping for the best two or three weeks out from sale day.

Example:

  • 500 Dorset Merino x lambs for delivery window of 15th October till 28
    • Lead draft from 2000
  • Offering delivered to works cents per kilo dressed.
  • Carcase weight range 20–25kg. (Make this what ever you can deliver)
  • Delivery radius 750km (this can be any distance or unrestricted)
  • If you want, add the minimum skin price you will accept.

This is a win/win situation. The producer creates visibility of what they have available and the processing sector can identify supply with a suitable lead time.

There is no reason this concept cannot be applied to slaughter cattle, mutton or live export. Control remains with the producer. If the price is not suitable, pass them in and sell later. If the price is right, manage delivering the livestock to the specification you have offered and contracted. If the first run is sold and you are happy with the price and where they are going, negotiate on delivery of the balance with whatever grid or arrangement agreed too.

In the last week of August, lamb prices took a small dip, which is quite normal. Old lambs moved from $7.40-$8.30 back to $7-$8. Suckers in limited numbers range from $7.80-$8.40. Sucker skin indications on 23–25kg carcase hook lambs are $4-$7. A couple of special sales have seen the normal early competition to secure available numbers afterwards reaching around $9. I expect this will be short-lived and again is normal at this time of year. Mutton is still appearing in reasonable numbers from normal agricultural shearing and dry areas, although prices have eased over the last week from $5.80-$6.50 back to $5-$6 for trade sheep.

Click here to read a recent comprehensive lamb market update on Sheep Central.

Trying to make the most of your circumstance and sheep asset I asked Mark Dearing, national sales manager for Animal Innovations for his thoughts. Sheep – “Widespread, reduced flock sizes have placed a huge emphasis now on keeping progeny alive to rebuild. This boils down to clever nutritional planning for lambing ewes.” Lambs – “With current prices there’s still a huge opportunity to finish lambs, even in light of the cost of feedstuffs – the pivotal factor involved is maximising feed conversion efficiency with a sound nutritional plan and feeding system.”

 Paul Keynes Elders Murray Bridge, gave a quick report on the annual Murray Bridge sucker lamb sales. The first sale only yarded 1500 quality lambs and normally this number would range between 3000-6000. The second sale drew just over 5000 with keen competition from processors and professional lamb backgrounders. Topping at $224, it was considered the cents per kilo range paid was $8.30-$9.

Rodwells Wimmera manager, Wayne Driscoll said the season over the last six to eight weeks in his area has been outstanding. Lambs don’t seem to be any further advanced than normal though and he expects the first decent run of suckers to appear around 25 September with the main run around 10 October. Wayne did comment that the Wimmera lambing numbers are down 10-15pc and the very cold, wet Western Districts season will impact numbers also. Wayne suggests there will be lighter lambs early then a gap waiting for the main areas to put some weight on and dry out. From Wagga down to the Western Districts and the south-east of South Australia seem to be where there is any hope of significant numbers from November on, he said.

Speaking to Paul Quade, Quade Moncrieff Livestock and Property, West Wylong, he said the ability to get back into breeding ewes is going to be a significant hurdle for many of the traditional sheep, wool and grain operations both on price and quality available. Several NSW and SA pastoralists have raised the same concern on how to keep the ewes on hand and retain a viable base to reignite their operations with any rain.

Observations outside of the grassed areas is lambs are a month behind and many lambs will not hit the normal weight ranges considering the limited paddock feed. September run of lambs maybe short lived especially if we have a hot day instead of rain. The numbers during this period often inject a core of stores into the system for the Dec – March trading period.

Cattle

I will leave pricing commentary out as the volatility in the market based on season now makes every day a different picture looking forward.

The strength of your relationship with agents, processors and feedlots will now pay dividends if you are talking to them early and know what your target, specification and timing is. It is very important to gather as much information as possible as early as possible.

There was a very real expectation numbers would struggle in August. We saw the cow and bull job strengthened which is normal and a flurry of interest around store weaners early.

However, when the southern rain slowed up and the marginal areas copped a few frosts the caution crept back in. David Corcoran Delta Ag at Young said the last week has seen the moisture profile declining with frosts and no rain. The season is a bit behind; however, we are not complaining as it is far worse only a short distance away but it has stopped the buying enquiry, he said.

The New England is in a really bad way. Whilst at Inverell last week I had a discussion about some well-bred Angus cows with June/July drop calves. My thoughts were age and quality would make them a valued article, wrong – they are incredibly difficult to shift and represent excellent buying for any looking to have a go. Demand for small cattle out of the Alice Springs is the same, with a real aversion to taking an opportunity to put lighter cattle away.

Mark Dearing, Animal Innovations said drought has created an absolute necessity to focus on smarter nutrition to target events like weaning to maximise the use of precious feed, as well as transport management to ensure stock stay healthy and sound in transit.

A common thread in all areas that have had a reasonable winter is “will we get a spring or will it shut down?”

The seasonal difficulties of the past 12 months have created a very real resistance to following a normal trading or production pattern for many. Everyone is second guessing themselves. Rob Inglis, Elders Wagga Livestock Production manager is a fervent believer in pasture mapping. He said take the time to measure exactly what you have available, how many it will feed, how long for and how much weight will be provided. Then start benchmarking your production. So simple and so effective.

One lot feeder expressed the southern cattle job contains a lot of “if’s” at present. Relationships built over many years are seeing his traditional suppliers booking space and prepared to manage the pricing later. This shows a very mature business relationship – swings and roundabouts.

However, the continued dry has seen many traditional September/October sale cattle come forward. It is amazing how quickly supply changed from tight in early August to most feedlots from the NSW/Qld border to SA now three weeks out, with some taking a buying breather from a short period. This is not new in the livestock scene and happens from time to time. Relationships and trust come into play at these times. If you have cattle to sell and you know when they will be ready, book space and sort the price out later.

It seems since the royal commission, banks have become an easy target and conversations are happening every day about what happens when it rains and who will supply funding. I called a mate of mine Michael Laidlaw, RABO Clare and asked for his thoughts. He said he has covered a lot of country in the last four weeks doing a three-week stint in Emerald, Qld, then Balaclava, SA, and the subjects and questions remain the same: “Rain., will the feed hold on / pick up? Will the crops get through to harvest? Do we cut extra crop as hay? Do we put stock out on crops now? Do we look to buy extra livestock now at the prices?” The hat style may change, but the words are the same.”

My opinion is a good agri finance manager, good stock agent and a switched-on livestock production specialist are money well spent. People who understand what producers do on a day-to-day basis are very valuable to your business.

Find good ones, make use of their skill sets to help do some cost/benefit analysis and make sure you are in a position to act as required.

Opportunities

  • AuctionsPlus forward contracts for lambs
  • Cows and calves
  • Light cattle
  • Merino ewes, Merino ewes, Merino ewes
  • Marginal crops turned into hay – money for jam
  • Find good advice and value it
  • Money on Geelong and a splash with Brisbane.

www.agricareeradvice.com.au

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