| Producers face choosing whether to build herd or bank balance |
LIVESTOCK producers will face a tough choice when seasonal conditions improve says Australian Bureau of Agricultural and Resource Economics and Sciences chief commodity analyst Jammie Penm.
The December quarter agricultural commodities report released by ABARES last week predicted positive profit increases of between 9 and 39 per cent for beef, sheepmeat and wool in the 2015-16 year.
But Mr Penm said the report was “more than just that rosy picture about farmgate prices”.
“In beef, we have very strong international demand, but seasonal conditions are still very crucial for the future price movement, and so is production,” he said.
“Especially if we are getting into herd rebuilding stage, if seasonal conditions permit, then it will be challenging for producers because they are facing very attractive prices, but at the same time they have to make a decision about if they want to maintain turn off, or herd rebuild. If herd rebuilding increases, then there will be implications for production, because slaughter will be down, and then there will be implications on farm income, because you have to forego relatively favourable prices.”
The ABARES report forecast the weighted average saleyard price for beef cattle to be 505c/kg carcass weight in 2015-16, a 39 per cent rise year- on-year. After reaching a 36-year high in 2014-15, cattle slaughter will drop 11 per cent in 2015-16, the report says, and the beef cattle herd will drop 1 per cent — the third consecutive annual decrease.
“International demand for beef is still quite strong, so we will have no problem selling beef to the main markets of US, Japan, Korea and China,” Mr Penm said. “But because slaughter will be down if seasonal conditions improve, we don’t have a matching increase in export value, the same as farm gate prices.”
Sheep producers could have the same tough decision to make in the near future, as prices are also forecast to rise for lamb. Poor seasonal conditions encouraged high turn-off of sheep in Victoria, despite the industry looking towards a rebuilding period, with sheep and lambs sold through saleyards in Victoria and South Australia up 9 per cent in the four months to October.
ABARES predicted south east Australia would follow areas that have a better season next year, and the widespread flock boost, would lift national sheep numbers by 1 per cent in 2015-16 to 71.2 million. This reduced turn-off would lead to a 9 per cent rise in the average saleyard price of lambs to 565c/kg, and a 10 per cent rise for sheep to 365c/kg, in 2015-16.
The price of wool is forecast to rise 10 per cent in 2015-16, and Mr Penm said the major contributing factor for higher prices was the reduction in supply by 2 per cent.
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