Anthony White - Gateway Livestock Pty Ltd

Anthony White  
Principal 
Gateway Livestock Pty Ltd

 

2018 Before, during and after

As we look forward to 2019 it is perhaps best to first look at 2018; a year that most farmers and graziers will prefer to forget, or take a lot of lessons from.  2018 started dry and ended dry.  The trend started in mid 2017 with a yearly rainfall deficit.  Where I live in Dubbo the year to date average rainfall is 625mm.  So far in 2018 only 277mm has fallen, most of that recorded of late and by way of storms.  The season, to say the least, remains patchy.

In 2018 we probably saw the largest ever movement of hay and other fodders from Victoria and South Australia to Queensland and New South Wales.  The Newell Highway was a convoy of B doubles heading north, north-west or into the Hunter Valley to nourish hungry stock.

In winter it would be fair to say a large sell down occurred as graziers were endeavouring to preserve their precious breeders.  The market for cattle was very volatile through the winter months, especially for the abundance of young stock which were for sale.  The ESYCI started the year at A$5.80/kg and will end the year around A$5.20/kg – a very ordinary outcome if you have spent a lot on stock feed as many people in NSW have.

The lamb and mutton market fared somewhat better.  Feeding lambs and to a lesser extent mutton produced better financial results.  In July and August new records were set with the best heavy (grain finished) lambs recording prices above A$300.00 per head.  In the same period mutton was very strong, peaking at above A$5.00/kg on a dressed weight basis.  The wool market fired over the corresponding period at near record levels making a perfect storm for prime lamb and Merino producers.

The lack of rainfall made it difficult for croppers to get a start, planting was spasmodic.  For those who did get a crop in the yields were low, but the current high prices will help them to recover costs and in some instances, make a modest profit.  It was a different story for cotton producers who had a dry finish to the 2018 crop after a mild summer, with water allocation from the 2016 carryover and prices good.  It would be fair to say most had a bumper season, especially in this part of the world.  The cotton seed produced from this harvest was a godsend to the livestock industry which lapped up the product to keep stock alive.

In all 2018 was a challenge to most people on the land or associated with it.  In summary we will start 2019 with a list of negatives which we will need to deal with including low water storage levels, depleted grain inventory, depleted hay inventories, a shortage of in-specification feeder cattle and a reduced sheep flock with a much reduced lambing percentage.  The frustrating thing is that our government has yet to realize the knock-on effect the nation will be left with from this drought.  Food security and export viability are key areas they need to consider on behalf of every Australian.

Looking forward to 2019, the question is will we see rain or will it stay dry.  Every farmer and grazier will be formulating their view and positioning their business to take advantage of or manage what they are presented with.  The best intelligence says it will be dry to average for the foreseeable future in eastern Australia.

On a positive note we are selling our produce into strong international markets.  Japan remains a key market for beef with solid demand and prices sound notwithstanding the push from the USA to win back market share.  Ditto Korea.  China is a leading growth market for beef, lamb and mutton.  This will be strengthened by the discovery of African Swine Fever in their own huge pig herd.  China beef imports from Australia are up 23% year on year in calendar 2018.  The USA remains the key play for our grinding beef.

This good demand for our red meats and a tight supply locally should see livestock prices remain firm and may even get dear as the year goes on.  The Aussie dollar will play a part, as will politics, in how livestock producers fare.

Wool may be volatile due to our high reliance on China as a buyer and if the USA/China trade war is not sorted I see much uncertainty going forward.  Obviously the cotton crop will be smaller on the back of low rainfall and lesser water allocations.  I would suggest livestock producers who need cotton seed lock in requirements soon to avoid disappointment.

The lamb market looks in good shape with domestic and export demand at good levels.  Prices have stabilized, currently $600/650c dressed.  The writer does note January contracts for domestic lambs were written at rates above $8.00 per kg dressed.  Mutton should enjoy solid demand with lesser numbers on offer and good export enquiry.

The low interest environment we are currently in will see land values remaining high.  In my view demand is far in excess of supply on rural land of all types.  Underlying commodity pricing is good, terms of trade are favourable and the Aussie dollar is at a manageable level for exporters so all in all I am bullish that this market will keep rising.

So, once again, it comes down to Mother Nature and what she has in store for us.  Keep your chin up and have a Merry Christmas.

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