Australia chooses to de-stock

The Southern Farmer
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DE-STOCK: MLA Australia have confirmed what industry experts predicted – poor seasonal conditions have seen the country officially enter a de-stocking phase.

IT all depends on the weather.

So often, this is the catch-cry statement from farmers, from livestock agents and from industry investors.

But as winter sets in for 2018, the statement has never rung more true.

News last month from Meat and Livestock Australia confirm the country is now officially in a cattle de-stocking phase.

At the same time, grain prices have continued to rise as hay supplies tighten across the country.

So, the question remains – what will happen to the markets?

Dropping prices – particularly for light-weight stock – have begun to steady; but will a spring break see a resurgence in price?

According to some, it depends on the female kill numbers over the next few weeks.

Industry analyst, Simon Quilty, said Australia was now at tipping point.

“Australia’s drought conditions have now reached a critical point, whereby for the first time since 2014 the female kill has reached 52.6 per cent of the total adult slaughtering in April,” he said in a June statement.

“This, I believe, is stage one of a potential liquidation process – and is historically the level at which previous drought liquidations have occurred redundant.”

Mr Quilty said the difference between the current drought and those previously endured was the size of the national herd.

“Should liquidation continue, it will be starting from a low base herd size of only 28.32 million head, and should the current drought resemble previous periods, then a fall in herd size of greater than one million head would be very feasible,” he said.

“This would put the herd back to the similar lows of 2016, where the herd size was just over 27 million head, but more importantly realised record cattle prices in Australia.

“As stated in previous reports, I do not believe there will be any ‘fire sale’ of Australian beef, as there was in previous.”

Late last month, AuctionsPlus released their market update – noting that belts were tightening across the board.

“Conditions are limiting supply across all marketplaces of properly finished prime stock, and the cost of supplementary feeding to attain slaughter weight and condition is tightening margins significantly,” Mr Quilty said.

“The majority of listed cattle fell into the weaner and yearling category.”

Rohan McRae, from Elders Korumburra, said the market was showing signs of improvement at a local level.

“The market is firmer – dearer – on the best bred cattle and weaners,” he said.

“The better end is certainly dearer – overall, I think it’s firmer.”

However, as was being experienced across the country, Mr McRae said poorer stock coming onto the markets were being passed in on-line, or were selling for less than ideal in the saleyards.

“Simply,” he said, “the weather will dictate.

“I’m in deep south Gippsland – so to be honest, the rain was late but not too late; it rescued us.

“We don’t need much rain now till September – but nearly everywhere else needs more.

“Is it too late for them? It’s better late than never.”

Mr McRae said he was not surprised many producers had chosen to de-stock rather than ride the poor season out.

“Grain is going through the roof, hay is near unprocurable – it doesn’t leave you with a lot of options,” he said.

More farming news and stories can be read in the July, 2018 print edition of The Southern Farmer or click here to access digital editions.