Prices plummeted at Charters Towers cattle sale last week. Things have turned from bad to worse for northern cattle producers. For the past three months Charters Towers, the North’s major selling centre, have had more cancellations than actual sales.
Only months ago cattle in central and south NSW and Victoria were also suffering low prices. Thank goodness for the live export trade that sourced cattle from those areas to freight out of SA – their involvement put a floor back in the market for southern producers.
Usually, by this time of year cattle prices would usually have risen substantially after rains, and the live shipping industry keeping markets buoyant. However the real fact is that live exports are only just now making a slow comeback, while over 70% of Australia is still in drought, or anticipating a very tough winter with low water and feed stocks. Despite the hard sell on the Weather Channel and Nightly News, this year’s heavy rainfalls were constrained affairs, falling mainly along coastlines or in small areas and leaving every surrounding neighbour looking over the fence with envy at the one place that received rain in that district. Cyclone Ita hardly moved further inland than about 100kms, and remained in the north. Many do not realize how poor the water and grass situation is across much of the country.
Last week, some abattoirs were paying $3.20 for cows and up to $4.20 for prime yearlings. In Townsville (1.5hrs from Charters) where the live exporters were once again moving in on stock, prices even rose to $3.50. But at Charters Towers, good cows were reported at $0.40/kg and less – is this a glaring case of market manipulation?
A producer selling a 500kg beast at $0.40/kg would make a return of $200. With a dressing percentage of 53% that would mean 265 kilograms of carcass beef is acquired in the works. Using a boning percentage of 70% – one could expect 185.5 kilograms of saleable meat and if the meat averaged $6/kilogram, then that animal returns $1113 to the processor. On top of that, we have calculated the by-products and hide bring in an extra $260 – a return of $1373 before costs for the processor. Dressing percentage and boning yield will vary from various cows.
(We used the price of $6/kg across all cuts because they will take the primals out and sell for better money, and assuming the rest of the cow is grinding beef quality only, this attracts $4.90 to the USA, so $6 is a good general price to work on.)
One agent expressed his disgust at the prices offered at Charters Towers. He went on to speak about how it was the lowest price he had ever seen since he started working with stock in 1967. He said “People can remember other crashes when cattle made $0.10 a kilogram, however people are inclined to forget that since then cost of production has increased upwards many times over.”
The same agent said a top line of cows at Charters Towers, which were the top pen in the sale, had only bought $0.69 live weight. He felt that producers would have no chance of surviving with these prices.
Somebody suggested that cattle would bring $3.20 in the US. One of the buyers suggested that they could easily sell the cattle in the US for more money, because currently USA’s cattle herd is at its lowest since the 1960s, and US producers regularly receive twice as much for their cattle as Australian producers receive anyway. The interesting fact is that the meat off these cattle could quite easily end up in the US!!
It was made very clear that industry blames the multinationals meat processors for a lot of the problems.
Over the years multinational processors have made their disdain for the livestock auction system. Firstly they prefer to buy cattle across the hooks, which then allows them to discount for any number of reasons (using the specs sheets) and they can be sure that they can assess carcasses before buying.
However, the saleyards are useful to the processors. If saleyards prices are down, processors can adjust their prices accordingly. Processors are using oversupply to push cattle prices down in saleyards and in the paddock.
Producers are between a rock and a hard place. Unable to book cattle into works for months to come, they sell at the saleyards where they are at the mercy of buyers with a full book.
Cattle management has ensured that people are breeding better cattle, using better nutrition, managing their lands more selectively, and this all means there are now too many cattle for the present kill space. When you add this to the fact that processors are boasting that they have sold more beef overseas than ever before, for better prices than before, and that trend is continuing. It is shocking to think they will continue to retain those profits and nothing comes back down the line to the producer.
One producer who sold hundred cattle at Charters Towers was horrified at the prices they received. They estimate they lost $200 a head. It appears the family had sent cattle to the processing works, and what cattle they had left over they took to the sale, only to receive shocking prices.
Previously they had put some cattle into a feedlot and now have a $20,000 bill from that feedlot, and little return on the animals fed. The person interviewed said they would never be able to get their family to take over the farm, because returns were so poor.
written by: David Byard & Linda Hewitt
Issues to be discussed in the next issues:
- Should the round Table and the Square Table on Sustainability in the Beef Industry – Should they be Collapsible Tables?
- What is happening in the Senate Hearings into the Collection of the grassfed Levy?
- Cattle Council will no longer be funded by MLA after December 2014
- How is the Red Meat Industry set up that allows MLA to call the shots?