Weekly Agribusiness News Recap

By: "Farm Tender" News
Hay & Fodder News
Jun 06, 2019
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This article is bough to you by Bruce Robertson Transport.

By Georgia Devenish - Agricultural Research Analyst at JLL

Livestock

The South Australian Government has announced that it will remove the last Ovine Johne's disease (OJD) movement barrier on 1 July. The long standing barrier restricted South Australian farmers from sourcing sheep from Victoria and New South Wales and bringing them into the state. This comes as a response to the drought, with the Government hoping this will facilitate growth of the state's flock once the drought breaks. The removal of these restrictions will bring South Australia in line with the national OJD program.

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Records continue to be broken in the national lamb market. Last week the Eastern States Trade Lamb Indicator hit a high of 889 cents per kilogram, 5 cents per kilogram higher than the previous record set in August 2018. The Merino lamb indicator also hit a record of 820 cents per kilogram last week just as a new national record saleyard lamb price was set in Griffith, New South Wales. Prices have come off this week but it looks as though the supply shortage due to the drought may be taking shape with competition to secure lambs remaining strong at the sale yards.

Projections from Meat & Livestock Australia (MLA) suggest Australia's sheep flock could decline to its smallest number since 2008. Ongoing drought in key production regions has led to heightened sheep slaughter and lower than expected lambing rates. Strong demand in international markets and a lower Australian dollar has helped to maintain prices despite the increased slaughter rates. Lamb production is expected to be down 7 percent year-on-year in 2019 while mutton production is forecast to fall by 12 percent.

Beef exports in May were the highest seen since August last year and the largest monthly tonnage out of Australia since December 2015. It is expected that production volumes will gradually decline through to the end of 2019, if conditions remain broadly dry, as supply of slaughter cattle dries up. In the event operating conditions improve, the extended liquidation of cattle across parts of eastern Australia has the capacity to have significant implications for production.

Cropping

Drought has halved the national cotton crop according the Cotton Australia's chief executive, Adam Kay. The 2018/19 national crop is forecast at approximately 2.1 million bales as dry conditions and low water availability drive down both the area planted to cotton and yields. Mr Kay has said the crop will still generate around $1.5 billion worth of export income despite the smaller crop. Cotton in Australia is currently worth around $580 per bale, while cotton seed is returning approximately $400 per tonne.

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Below average rainfall, record-low soil moisture and a poor seasonal outlook have all contributed to an expectation that Australia's winter crop will be lower than average. Poor planting conditions are not only affecting farmers in eastern Australia, farmers in South Australia and Western Australia are also experiencing less than ideal starts to their cropping seasons. It is also likely that there will be a broad shift away from canola and pulses to cereal in response to price incentives and their risk profiles given the uncertain seasonal conditions.

Wine/Vineyards

The Australian Competition and Consumer Commission has released its interim report into the wine grape industry. The paper provides recommendations around quality assessment, price transparency, payment periods, strengthening the Australian Wine Industry Code of Conduct and unfair contract terms. Interested parties are invited to make submissions on the report, or other relevant issues, by 28 June 2019.

Forestry

Speaking at a forest valuation conference held in Hobart last month by the Institute of Foresters of Australia, managing director of Indufor Asia-Pacific (Australia), Andrew Morton, has suggested that the past 20 years have seen 93 forestry transactions in Australasia with a value expected to be in the range of $12-$18 billion. The deals represented approximately 3.3 million hectares of tree crops – around two-thirds softwood and one third hardwood with values broadly ranging from approximately $4,500 -$13,000 per hectare for softwood tree crops, whereas hardwoods ranged from $2,000 - $6,000 per hectare.

Dairy

A fall in the cheddar index of 14 percent and 10.3 percent in butter prices resulted in a 3.4 percent drop in the Global Dairy Trade price index earlier this week. Most categories fell with the exception of lactose (up 0.4 percent) and rennet casein (up 4.2 percent). Analysts are not overly concerned that the fall will have an impact on the bullish outlook for dairy prices regarding the drop in butter, for instance, as a check on recent gains. Prices remain 23 percent higher than at the end of last year.

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Coles has confirmed it will begin sourcing milk directly from farmers in Victoria and southern and central New South Wales from July. An expression of interests campaign has begun to find farmers interested in the direct sourcing deal. The deal would provide longer-term contracts of one to three years, locking in guaranteed prices to farmers for two years and a floor price in the third year with flexible supply options. Saputo Australia will continue to pack the milk from the Coles' house brand milk. The supermarket chain believes its new offer would deliver more value to farmers and improve price certainty into the future.

Agribusiness

Coca-Cola Amatil has sold the Shepparton Preserving Company (SPC) for a reported $40 million. The purchaser is Melbourne-based company, Shepparton Partners Collective, a joint venture between Perma Funds Management and The Eights. Since acquiring the SPC business in 2005, Coca-Cola Amatil invested around $250 million into improving technology, operational and energy efficiencies and new equipment.

AgTech

Gippsland Regional Livestock Exchange will begin simulcasting live auctions this week through new online auction platform, Stocklive. The technology will allow potential buyers to view stock available for auction and bid. The platform was developed utilising a Federal Government grant, and a contribution from the Australian Livestock Saleyards Association.

Water

NT Water Pty Ltd has reportedly put forward a proposal to the Northern Territory Government to build a major new water storage facility and 10,000 hectare agricultural precinct south of Darwin. In a statement made to ABC Rural, NT Water said "the proposed facility is based on harvesting water using gravity diversion from the Adelaide River to an off-river storage facility on the eastern side of the Stuart Highway near Manton Dam."

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Property

Consolidated Pastoral Company (CPC) has sold 'Manbulloo Station' in the Northern Territory on a sale and leaseback basis for more than $25 million. The 370,910 hectare station was acquired by an investment group, described as a 'mix of foreign and local [investors]' by CPC chief executive, Troy Setter. This sale follows CPC's divestment of five of its other properties since the beginning of 2019.

Trade

Excessively wet conditions in the US contrast to the dry start to the Australia cropping season have both been of note in the estimation of global wheat production for 2019/20. The combination of both these weather events could see Russia and Ukraine become more dominant players on the global grains market. The May Rabobank agricommodities markets research report, released last week, showed the Black Sea region will remain key for the development of pricing this year. The May 'World Agricultural Supply and Demand Estimates' report released by the US Department of Agriculture (USDA) puts Black Sea wheat production for the 2019/20 season at 106 million tonnes, a projected increase of more than 9 percent on 2018/19.