Agribusiness Newsletter August 2009
Contents
Meat Industry
- Summary of ABARE Forecast for 2009/2010
- Increase in the number of cattle on feed
- Valuable beef quota to EU could increase
- Russian meat ban a blow to QLD kangaroo processors
Wine Industry
- Undoubtedly export values are down, but there’s uncertainty about the signifcance of this
- The AWBC’s Lawrie Standford says export infuences are many and varied
- We’ve talked generally of the recent surge in exports to China
Dairy Industry
Grain Industry
Other
Meat Industry
Summary of ABARE Forecast for 2009/2010
- Increased competition from the US and lower overall demand for beef is likely to result in forecast exports to Korea and Japan declining by 5% and 4% respectively. This is balanced to a degree, by an expected 11% increase in exports to the US, on the back of increased demand for cheaper meat cuts.
- The price forecast for lamb and sheep are dependent on the assumption of a sustained improvement in seasonal conditions throughout 2009/2010. Recent rains have increased re-stocker demand for lambs and sheep, which has contributed to higher prices. If seasonal conditions deteriorate, producers will turn-off more animals which will put downward pressure on sale prices.
Increase in the number of cattle on feed
- Due to lower input costs and steady demand for beef from domestic markets, the number of cattle on feed increased by 10% in June, up 8% on the same time last year. Feed grain prices are currently 37% cheaper than this time last year.
- The above numbers are driven primarily by cattle on feed for domestic markets, with numbers increasing from 175,000 to 241,000 (37% increase).
- These increases are not accurate and are likely to be higher due to the fact that there are a number of smaller on- farm feedlots, particularly in Victoria, which are not accounted in the offcial survey conducted by the Australian Lot Feeder’s Association.
- The above changes have also resulted in the normal spike in prices over the winter months, no longer being as prevalent as in previous years. Experts are suggesting that the growth in lot- feeding cattle has taken the highs out of the market with trade cattle now sold at much more consistent price levels.
- The above numbers are also supported by the mix of cattle bought by processors. For example, it is estimated that fve years ago a processor in Victoria covered approximately 15% to 20% of its winter kill from feedlot animals, whereas today this number has increased to 30% to 40%.
Valuable beef quota to EU could increase
- Australian cattle producers could soon export an extra 20,000 tonnes of beef into the lucrative European Union (‘EU’) market. The EU and the USA are in negotiations over a new bi-lateral agreement for more than 80,000 tonnes of beef to be shipped into the lucrative market. The new quota applies to high quality beef, grain fed for at least 100 days and conforming to a Government grading system.
Russian meat ban a blow to QLD kangaroo processors
- Russia has decided to suspend the importation of kangaroo meat from Australia and as a result, about 2,500 jobs in QLD are under threat. Meat and Livestock Australia (‘MLA’) has been told the ban relates to microbial contamination, but has given no other details.
- The ban impacts primarily on two kangaroo abattoirs in Charleville and Longreach. The Longreach operation, which has been sending Russia 30 tonnes of kangaroo meat a week, has already closed.
- The problem arises primarily as a result of animals killed in the paddock, rather than a controlled environment, such as an abattoir. A kangaroo carcass can be kept in a chiller box for up to 14 days before it is delivered to the abattoir for further processing, thus greatly increasing the risk of contamination.
Wine Industry
Undoubtedly export values are down, but there’s uncertainty about the signifcance of this
- The 10% drop in 2008/2009 to $2.43b, linked to an average price decline of 15% to $3.24 per litre, is readily blamed on a drop in overseas consumption for all sorts of reasons, including of course, the global recession.
- But export volumes in the same period rose 6% to 750ml.
- Despite the economy, exchange rate volatility, intense competition from other suppliers, together with supply and demand imbalances, export volume was nonetheless the second highest on record while the absolute value declined less than in 2007/2008.
- Bulk shipments increased following bigger harvests last year and this year, because of a favourable Australian dollar for much of the past fnancial year. This is due to some companies deciding to bottle overseas for economic reasons, and because much wine is being marketed under buyers’ own brands.
- Australian Wine and Brandy Corporation (‘AWBC’) senior analyst Peter Bailey says “conservative economic behaviour” is boosting low priced bulk wine sales at the cost of bottled wine deals, the UK remaining our biggest market by volume and the US by value.
- Fine wine exports have been the hardest hit by the world’s fnancial crisis in the past 12 months. The reason for this is because last year’s wines in the $180-a-case category (and above) had grown in volume and value while export sales in other categories were down.
- As a result, towards the middle of last year, Australia’s fne wine exports were up 4% in volume, 7% in value, showing an average 3% per litre price increase, while those for other-category wines were down 8% in volume and 5% in value.
- According to the AWBC, by the same time this year, fne wine ($180 a case and above) export volumes were down 17% against a drop of only 1% for other categories, while the corresponding fgures for value were 15% and 14%. Nevertheless, at the same time, Australian Landmark shipments (quality wines) held value, in that their average price was increased 2% while that for other categories plunged 14%.
The AWBC’s Lawrie Standford says export infuences are many and varied
- Two years ago, exports peaked at 800ml and declined thereafter until, from a low of just under 700ml last November, they started to increase again.
- According to Mr Stanford, some of the common misinterpretations for the decline were that Australian wine had gone out of favour and that there had been a recent return to volume growth and bulk wine exports.
- Mr Stanford stated that Australia’s wine exports are predominantly bottled and that bulk wine has always been in the mix. However, it’s the “structural content” of ballooning bulk exports and their circumstances that is promoting debate on what’s a good thing and what’s not.
- Mr Stanford has compiled a six- phase history of bottled and bulk wine contributions to exports, a history in which he suggests are embodied pointers to the future. (For details phone 08 8228 2000 or go to info@awbc.com.au).
We’ve talked generally of the recent surge in exports to China
- While total wine exports dropped some 10% in value in the past fnancial year, those to China grew by 60% (and more than 90% in volume).
- In the past year, mainland China recorded the largest growth in value ($34m) of any of our export markets, driven according to the AWBC, by continued growth in bottled shipments and a recent surge in bulk shipments. Runner-up in growth was Hong Kong ($9.6m, representing a 24% volume increase and a 29% rise in value).
- In the same period, Australia’s major export market, the UK was down almost 6% in volume and 21% in value, the US was up 21% in volume but down 10% in value.
- While it’s true exports to China (23ml worth $91m) pale in comparison with those to the UK (257ml worth $715m) the up-beat fact remains that China is no longer grouped in “other countries” by the AWBC in its reports on export sales. China is now shown separately as Australia’s ffth most important in volume and fourth in value among Australia’s wine export targets.
Dairy Industry
Sale numbers increase
- The recent reduction in milk prices being offered across Southern Australia has seen an increase in the number of dairy cattle being sent to market. The increase in cattle sent to the saleyard has been interpreted by many as a sign of increasing numbers of producers deciding to exit the market.
- While prices for productive cattle has slipped, the market for chopper cows has remained relatively frm. This narrowing of the price gap has reportedly encouraged some producers to use this situation as an opportunity to turnover animals and renew their herds.
No Government handouts
- The rapid deterioration of dairy prices on the world market has prompted a number of governments, primarily those in the European Union and USA, to enact a range of assistance measures for their dairy farmers. As the price offered to many producers has fallen below the cost of production, there have been increased calls for Australian governments to intervene and provide direct cash assistance to dairy farmers. However, the response from governments has been clear – there will not be any cash handouts to assist dairy farmers in the foreseeable future.
Grain Industry
Rainfall concerns rise
- As growers in the southern grain belts approach the end of winter, the optimism that accompanied the bumper start to the season is giving way to a sense of apprehension about future rainfall patterns. Across many grain growing areas, July rainfall was well below average for the month, leading to concerns that growers may experience yet another season with below average rainfall. Such concerns are exacerbated by the fact that many crops are thicker than normal, due to the good early season, and thus have higher transpiration rates.
Prices retreat
- Price falls of around $25 per tonne have been experienced for last season’s crop. Grain industry analysts have cited a number factors contributing to this reduction, including the strengthening Australian dollar and expectations of a good upcoming harvest.
- The situation is also being impacted by the most recent estimates of worldwide wheat production. The International Grains Council has recently released an estimate of the world stocks of 174 million tonnes, which is the highest level since 2001.
- The price being offered for new crop grain is currently around $35 per tonne below the prevailing price of old crop grain. It is expected that as the season progresses, this price gap will narrow until the two prices converge.
Other
2010 Mulesing phase out not achievable
- Australian Wool Innovation (‘AWI’) has announced it will not be able to meet the 2010 deadline of phasing out the practice of mulesing in Australia.
- The debate around mulesing and the ethical treatment of sheep erupted fve years ago with the issue forced by People for the Ethical Treatment of Animals (‘PETA’), with a series of threats and potential boycotts by retailers. A deal was struck between the wool industry’s research and marketing body, AWI and PETA to see the phasing out of mulesing by the end of 2010.
- PETA has reacted angrily over the dumping of the AWI’s commitment.
- The AWI has adopted a new fy-strike prevention policy in place of meeting the deadline, however the body will continue to focus on the phasing out of mulesing.
- The AWI will recommend to the Australian Wool Exchange to include a category in the National Wool Declaration for clips from non-mulesed sheep or pain relief treatment for producers who have moved away from traditional mulesing.
Wool: Bullet proof?
- New research in Melbourne by RMIT and largely funded by AWI, has revealed when wool is interwoven with Kevlar in body armour, its effciency is increased.
- Kevlar is a low friction material which is woven into 36 layers and used in bullet proof vests. Although not designed to stop bullets outright like ceramic plates, the woven material dissipates a bullet’s energy enough to prevent fatal wounds.
- A short-fall of Kevlar is that due to the low friction nature of the material, it is possible for the bullet to slip through the fbres, known as ‘shouldering through’. Additionally when Kevlar is wet, the chance of ‘shouldering’ increases by up to 20%.
- Researchers have found that when a weaving mix consisting of 25%-30% wool is mixed with Kevlar, it helps the fbres stay together and reduces the chance of a bullet ‘shouldering through’ the armour. More importantly when the Kevlar/wool weave mix becomes wet, the effect is enhanced thus countering a weakness of Kevlar.
- Recently, during the Indian Government Elections, some 1.4 million bulletproof vests were ordered. At 3.4kg to 5kg per vest, a quarter of that weight could be wool woven with Kevlar. For this order alone around 1.75m kg’s would be needed.
Contacts
SydneySteve Parbery t +61 2 8116 3000 Andrew Smith t +61 2 8116 3060 Level 46 t +61 2 8116 3000 BrisbaneGrant Sparks t +61 7 3371 7244 Level 3 t +61 7 3831 2700 AdelaidePeter Macks t +61 8 8211 7800 Level 10 t +61 8 8211 7800 | MelbourneJoe Dicks t +61 3 9653 6209 Rod Slattery t +61 3 9653 6204 Level 10 t +61 3 9654 1517 PerthSimon Theobald t +61 8 9382 8933 Level 10, Parmelia House t +61 8 9382 8933 Port MacquarieDavid Leigh t +61 2 6580 0400 Level 2 t +61 2 6580 0400 |
