For every $1M the NT beef industry generated in 2012/13 it created another $510,000 within the NT economy.
For every 100 jobs held in the NT beef industry another 36 are created in the NT economy alone.
(NT DPIF Outlook 2013)
I began writing this blog about service providers to the Live export industry but then realised I couldn’t really do that without showing the fluctuations in the live export markets and how that impact affected producers and thus the flow on to service providers.
Therefore I have broken this topic into 2.
1. NT Live cattle export – Darwin
2. Hay & Fodder Suppliers to Live animal export.
I have not addressed animal welfare issues in these posts as I am working on some other blogs to address that.
Service providers to the Northern Territory live cattle export industry may not directly own cattle, but they fulfil a very important role to enable cattle production. They are many and varied, including fodder producers who grow and provide hay. Transporters , fuel providers or they supply goods and direct services, like stock agents or veterinarians. Without these service providers direct cattle producers simply wouldn’t have the capabilities to operate and conduct, our business of cattle breeding.
Chart 1. Ripple map illustrating the effects that the income of a live export producer has on the service industries and suppliers, in turn the cattle producers heavily rely on these other industries.
As livestock numbers and the value of cattle fluctuate by direct income to producers, that in turn affects the direct supply and demand requirements of supplies.
Within the Northern Territory cattle industry there were, according to ABARES at the end of 2013, approximately 2 million cattle located in the NT. This is about 15% of the total Australian Beef herd.
Chart 2. The NT Beef herd showing the long-term increase of the Mature female component and the total beef herd in the NT. Gradual increases have occurred since the mid 90’s due to better management and productivity practices and stronger influence of the Bos Indicus breeds.
600,000 sale animals are turned off annually from the NT; on average half go to live export and the other half to slaughter processors, or other producers in Australia.
2012 /13 Output cattle value of production for only NT origin cattle was $307.4M , including live exports and slaughter. For every $1M the NT beef industry generated in 2012/13 it created another $510,000 within the NT economy. For every 100 jobs held in the NT beef industry another 36 are created in the NT economy alone. (NT DPIF Outlook 2013). The beef industry dominates agricultural and fisheries production in the NT.
NT beef production operates on mostly natural open rangeland land systems dependent on natural rainfall occurrences. The Simpson and Great Sandy Deserts are located in the south, with very hot and dry climates and rainfall averages of 150mm per annum but very fertile soils. Contrastively the northern high rainfall tropics experience a distinctive high rainfall period and dry season with rainfall measurements of over 3m per annum with generally lower fertility soils.
To illustrate how live export markets have fluctuated over the last several years the following statistics are based on predominantly the live export of cattle from the Northern Territories only port, Darwin.
Charts 6 & 7. All cattle exported from Darwin. This is the exact same data as chart 5
High cattle numbers exported don’t necessarily mean more money earned per individual animal, producers are paid on a kilogram live basis on delivery of the animals, the price is dependent on current market situations.
Chart 9. Source LiveCorp. Livelink November 2014. Australian saleyard and live cattle prices. At $1.50/kg in 2013 a 330kg animal was gross value of $495, in 2014 at $2.60 that same weighted animal is now worth $858, 73% more than just 12 months previously.
In reference to the above chart NT DPI quoted no prices for records for live animals. In May of 2011 the market was approximately $1.65/kg. When the Indonesian live export ban was implemented June 6, 2011 only the cattle already on the water (2713 hd) were recorded, nil export occurred to Indonesia in July 2011. Prior to June 2011 at least 21,000 head were transported to Indonesia every single month for the previous 4 years. Many of the cattle exported immediately after the lifting of the ban in July 2011 were already pre-contracted prior to June and therefore not relevant to pricing after.. Personally, with difficulty to even find space on ships. ABARES predicted at July 2011 there were 365,000 unsold export cattle unsold (QLD CL 28/07/2011). we were able to sell some cattle to Indonesian markets in late 2011 and the price was again $1.65/kg late in the year. It was near impossible to sell cattle during the period of July to September. So many cattle were already in the ports supply region that stock agents weren’t even able to give producers prices because the exporters were simply not requiring more cattle to fill orders.
High livestock numbers does mean an increase in demand of goods such as hay and transport from service providers. These numbers have to be moving though. Many producers simply didn’t sell cattle and some didn’t even muster if they knew they couldn’t find markets.
Fluctuations, stoppages, increases and decreases in live cattle market demand has been impacted by many factors, some in conjunction and others significant in their own right. The following are not in any particular order and should not be considered as stand alone pressures that work independently to affect markets.
Import and live weight quotas by Indonesia were introduced in 2010 to attempt to obtain self sufficiency in beef production and consumption in that country. By the end of 2013 local Indonesian wet market prices increases had resulted in the significant easing of the policies as their government realised that 100% beef self sufficiency wasn’t possible in the short-term. A different quota system was introduced in 2014 dependent on pricing of secondary meat cuts in the wet markets. The trigger price is 76,000 Rp/kg ($7.43 AUS). If the local wet markets fall below this price, reductions will be made to limit import cattle and beef into Indonesia. This is hoped to protect their own beef producers from oversupply by Australia and yet enable surety of beef supply for their nation’s consumption.
Chart 10. All cattle exported to Indonesia from all Australian ports. Indonesian import quotas for live cattle were predominantly for feeder types >350kg. In 2014 part of the allocation was for heavier slaughter and breeder cattle.
The Darwin port has handled approximately 40% of all Australian cattle exports for the last several years and exported 60% of those destined for South east Asia in 2013. While some say the export quotas were the most restrictive of live export numbers, at least in 2011 a quota is still a quota and some degree of market. The ban was a complete stoppage. On going effects of the Australian decisions did untold damage to relations at the time and are only now being significantly rebuilt. Prior to 2011 market analysts have assessed that the Indonesian self sufficiency targets were unobtainable for years, proven by the fact that the target dates themselves were often extended. Report opinions were that it was a matter of time before demand from local Indonesians would pressure their government to allow increased imports of beef and live animals.
Following the Indonesian live export ban it was significant that other markets were able to be increased to Vietnam that accepted heavier types of cattle than what Indonesia preferred.
Other factors impacting on markets are currency fluctuations, weather patterns, economies within Australia and other countries, currency exchange rates, animal type requirement in breed, weight and sex, animal values, ESCAS implementation and cost, competition from other countries and the Australian meat processing sector, health protocols and change in requirements of the importing countries for both type and volume of animals.
Darwin is the only live animal export facility for the NT, some of the service providers in the NT may service other states like QLD and WA.
2014 cattle that have been moved through the Darwin port have regularly been double of the average for the combined preceding 5 years. This is significant because previously most cattle from Darwin were NT sourced, in 2014 that was not the case.
What I’m trying to show in these charts is that live cattle exports have been highly variable through the years with 2014 exploding.
A very broad estimate of about 80-90% of all Darwin cattle exported for the previous 5 years (Not including 2014) were sourced from NT properties. 2014 has seen the NT supply portion drop to about 65%, as the Darwin port has received significant influx of cattle transported from SA, NSW and QLD. A news article in regarding October exports stated that of the previous few months cattle exports over half had been supplied from QLD.
The flow of cattle coming from other states will be assisting service providers to the industry but it takes time to grow and produce fodder and meet the demand requirements.
How predictable are future live cattle export markets? Goodness, how long is a piece of string!
Indonesia’s issuing of import permits will depend on the new system which they have developed with the base price of 76,000Rp. At the moment Indonesian import permits for 2015 have not been released and meat prices are trading over Rp 100,000 per kg. It is expected that Indonesia will increase its cattle and beef imports above 2014 figures.
In the MLA Beef Industry forecasts, Cattle industry projections mid year 2014 the live export markets are expected to remain relatively stable in overall numbers as to what was then forecast to be exported in 2014. Markets in Vietnam, Israel and now possibly Thailand and China are looking promising for requiring significant numbers of live cattle.
The main restriction on the numbers to export may will sourcing cattle, given the huge turnoff in Australian slaughter and live export for 2013 and throughout 2014.
For cattle producers this gives us some degree of confidence that markets will be relatively good in 2015, with forecasts of good prices to go with it. Production wise we don’t change quickly as it takes time to build up numbers to take advantage of market access. What it does mean is that we focus on making sure the cattle we do have, meet the required specifications of what the markets demand.
If the cattle producers have confidence that markets are going to be consistent and improve then we will also be buying up on the goods and services that we need to place our animals in the best health production and presentation wise to ensure we can receive the optimum prices we can for the immediate future and going into the coming years.
So where has this led our service providers such as the hay and fodder production people?