Long and short-term debt owed by Queensland cattle producers has increased more than four-fold from $2.2Billion (in 2001) to $9.2Billion (in 2011)
Queensland accounts for 43% of Australia’s cattle inventory and a similar share of production. Queensland has the greatest number, and a high proportion, of specialist cattle producers.
The debt was relatively stable pre 2000. Then it started to increase sharply. Debt increased sharply through the mid 2000s then slowed post 2009.
Qld Rural Reconstruction Authority (QRRA) has, since 1997, commissioned a debt survey on a bi-annual basis.
The 2013 survey was not carried out due to the unavailability of information from lending institutions.
The cattle themselves are what generate the income in a beef operation.
Between 2001 and 2011 Queensland cattle numbers increased from 11.3 million to 12.6 million.
The above chart is derived by dividing the Qld cattle industry debt by the Queensland cattle inventory, which gives you approximately $727 per head.
The debt now exceeds the value of the livestock inventory.
In a pastoral situation, to sustain production, a producer typically turns-off one in six of his stock. The income from that animal sold is then required to service the debt on the other five head.
In this situation the first $349 of each sale (after sale costs are removed) is required for debt servicing – excluding capital repayments. Calculation is: $727 x 6 = $4362 @ 8% interest = $349
The Roma Saleyards reported that the average price of total of all cattle sold in 2012 was $674 per head. This leaves, after debt servicing, $325 per head to cover sale expenses, operational costs and provide family income.
NOTE: This margin reflects a “normal” non-drought situation, where producers sell their cattle when ‘market ready’. The $325 margin (per head after interest) is probably inadequate to operate the enterprise.
However, the average price at Roma in 2013 was lower, at $452/head.
Cattle sold at an average price of $452 leaves a trading margin of only $127. This is significantly less than the $725 average debt owed on each animal in the inventory.