Live export price squeeze

According to Brendan, in the past 12 months Wellard successfully completed 58 voyages, exporting more than 300,000 cattle from Australia (a lot of them from Townsville) and 65,000 from South America to markets including Turkey, Israel, Egypt, Vietnam and Indonesia. It also shipped other cattle for other exporters.

Brendan said producers across Australia are currently enjoying record prices for their cattle, if we use the EYCI as a general measure for performance then prices are up a good 100c/kg carcase weight year on year and are at levels never before seen by the industry.

While producers across Queensland are cheering that result after years of drought and low prices, and deservedly so, Brendan reckons it may unfortunately have a sting in the tail down the track.

“While it is encouraging to see so many satisfied producer clients with excellent prices and seasons, and you can’t blame them for taking the prices on offer, there are a number of our importing clients that are struggling with the current price they have to pay to secure quality Australian animals,” Brendan told me.

“As a result, those countries are investigating alternative sources of supply. Imported frozen buffalo from India is gaining market share with local consumers in Indonesia, and as more volume from India is imported into traditional wet markets, there will be a softening impact on prices in Australia for live export animals. While we continue to enjoy the strong support of our customer base in other overseas markets, there comes a time when they too will seek a cheaper product as an alternative to Australian animals, just as we saw with Brazilian beef replacing Australian beef in China,” Brendan said.

He told me that several South American countries are engaged in protocol talks with potential Asian customers looking to capture some of this live export trade, and pricing is more than competitive with Australian pricing even with freight factored in. It will then be up to the buyers in those countries whether they value price or the healthy, consistent and sustainable cattle which Australia produces.

“Still, with farmers looking to rebuild their herds after several seasons of drought, the future looks bright,” he said.

Wellard has also been working on exporting cattle out of Brazil, and the figures are amazing. “Brazil is an exciting and expanding market for Wellard. The recent addition to our fleet of vessels, the MV Ocean Shearer with a 20,000 head capacity, will have a significant workload in this market.

“Brazil has 220 million cattle, nearly 10 times the size of the Australian market, so there is enormous opportunity for Wellard in South America and so we have sent over an additional four staff on top of our already growing team in the region to help prepare for this expected growth.”

Over the past few days I have heard of the involvement of a Chinese company Fulida in the live export company Wellards.

Wellard CEO Mauro Balzarini said: “We welcome Fulida, who has shown a consistent interest in our industry over a long period, and now, as a significant shareholder in Wellard, giving it exposure to the full international beef supply chain into China and other countries. That Fulida has taken an equity interest in Wellard, and agreed to voluntarily escrow its shares, highlights its belief in the long term future of our business, our industry and the potential that China represents.”

ABARES’ recently released financial performance of beef farms, 2013–14 to 2015–16, commissioned by MLA, highlights the impact higher cattle prices have had on the producer bottom line.

The report draws on data from the ABARES annual Australian Agricultural and Grazing Industries Survey (AAGIS) which includes beef producers from northern and southern Australia.

While the financial strain from consecutive years of drought, particularly in Queensland, may not have eased completely, the 2015-16 fiscal year appears to have gone some way to improving farm profits and reserves for future investments.

Average farm cash costs in northern Australia increased 6pc in 2015-16, to $343,800, while the same metric in southern Australia rose 2pc, to $249,000 per business. However, the increase in costs was more than offset by the jump in farm cash receipts generated from significantly higher cattle prices. In 2015-16, northern farm cash receipts increased 15pc, to $532,200 per business. In southern regions, farm cash receipts increased by a lesser but still significant degree – up 11pc, to $399,300 per business – compared with their northern counterparts, due to the more mixed nature of the farm business (greater sheep and cropping) and smaller exposure to cattle price movements.

Subsequently, farm cash incomes increased 36pc in northern Australia and 31pc in southern Australia, to $188,500 and $150,000 per business, respectively.

David McIvor, McDougall & Sons reported that the 2016 Hoof & Hook has been pushed back a month, new date is November 10 – 12.

David said seven classes, covering domestic and export weights, live show Thursday 10th, carcass judging Saturday  November 12. David added there will be $10,000 prize money plus trophies. Entries close Monday October 31, enquiries to any Warwick agent or Show & Rodeo office.

David also gave me the latesest run-down on the seasons and positive effect on pastoral industry on the Downs. Spring season on the Downs is one of the best in memory. September rainfall generally 60 to 100mm, with isolated heavier falls. Upper Condamine River and all creeks have good flows without any flood damage. Both Coolmunda and Connelly dams are full, Leslie dam is at 35pc, and a big increase on early winter levels.

Cropping country looking a picture and on track for good yields. Grass country is away to a great start, with late oats carrying limited numbers of stock. Cattle numbers through Warwick Saleyards have declined in line with most selling centres, but good yardings of lambs continue to come forward for weekly sales.