By Peter Hobson
DELEGATE, Australia, November 29 (Reuters) – Half the typical amount of rain fell this year on Angus Hobson’s farm in southeastern Australia. That means he has less grass and will have to sell as much as a third of his cattle and sheep to make sure the rest have enough to eat.
He will sell in a market that has collapsed.
After three years of abundant rain and growing livestock, dry weather has withered pastures across Australia.
The stark change in conditions helped trigger the fastest plunge in cattle and sheep prices in decades, threatening livelihoods in Australia’s A$75 billion ($50 billion) red meat and livestock industry.
Prices of cattle raised for beef production fell from between A$3.50 and $7 per kilogram in 2021 to between $1.40 and $2.20 by October, while sheep fell from between $6.50 and $9.75 per a kilogram to between $1 and $4.50, data from industry body Meat & Livestock Australia (MLA) show.
Once they are shorn of their valuable wool, Hobson said he would cull up to 3,000 of his 9,000 sheep. Of his 200 cows, he said some breeding might have to go and “anything not integral to breeding will be sold”.
Others have already shrunk. Stuart Austin at Wilmot Cattle in northern New South Wales said he had halved his herd to 4,000 cattle since April..
SHOOTING STREET ROBBERS
November rainfall eased fears of a widespread and imminent drought, raising prices somewhat. But with forecasters warning that an El Nino weather phenomenon will bring a hotter than usual summer, experts do not expect a quick recovery.
Many farmers are selling animals for a fraction of what they paid for them and some have been unable to find buyers, shooting sheep they cannot sell, more than 20 cattle breeders and agents said in interviews.
Rising interest rates and a sharp increase in the cost of necessities such as fuel, machinery and fertilizer have also added to financial pressures on farmers.
While farmers suffer, falling cattle prices have brought some relief to Australian households hurting from high inflation. Major supermarket chain Woolworths WOW.AX recently cut lamb prices by 20%, according to an Oct. 25 memo from its CEO.
EXPORT RECOVERY
Export markets, where prices are now higher than in Australia, provide some relief for the industry. A leading meat exporter, Australia ships around $2.5 billion of beef and more than $3 billion of lamb and mutton annually.
Beef sales to the U.S., at more than 6,000 tons a month, hit their highest level since 2020 thanks to a drought that has shrunk U.S. cattle to their lowest since 1962 and pushed US beef prices to record highs. Shipments to top export market Japan are also rising.
Australia’s exports of lamb, mutton and goat meat in September rose to their highest level in decades, partly due to larger shipments to China, customs figures accessed by Trade Data Monitor show.
Falling US beef production means demand for Australian beef should increase, helping support cattle prices, said Angus Gidley-Baird, an analyst at Rabobank in Sydney. The sheep market will likely take longer to recover, he said.
Meat packers such as JBS JBSS3.SA and Teys Australia raised. Agricultural consultants Episode 3 estimate Australian beef processors are reaping their best profits in at least two decades thanks to low local cattle prices and high selling prices in export markets.
JBS and Teys did not respond to requests for comment.
‘EVERYTHING TOO FIGHTING’
Changes in prices and weather often cause livestock to rise and fall, but recent volatility has been extreme.
Australia pivoted from widespread drought in 2019 to rainfall so high it caused flooding between 2020 and 2022, to some of the hottest and driest weather on record this year.
“2019 has been two years in the making. This has been six months,” said Mat Larkings, a cattle agent in Walcha, north-east New South Wales, who said parts of his area had looked like a desert in recent months and he had seen. cattle too thin to be transported.
“This has come too soon since the last drought. Our customers have not had time to rebuild,” he said, adding that many farmers are struggling with depression as they fight to keep their animals and finances healthy.
Farmers say they will survive until prices recover, but with forecasters predicting more extreme and volatile weather as the global climate warms, some are wondering how they will continue.
Hobson farms on two properties near Delegate and Bombala, small towns in the southeastern corner of the state of New South Wales. In mid-November there was grass on the hills – some green and some pale, withered yellow – but the government said the region was already affected by drought.
Hobson sold all his cows during the 2019 dry season, buying new stock over the last year whose value has now plunged.
He said investment in water infrastructure, pasture subdivision and feed enclosures helped him cope with low rainfall, but the speed with which the weather dried up, livestock prices fell and costs rose made it difficult to service debt and manage cash flow.
“Our ability to deal with drought is improving,” he said. “But there will be cattle businesses that may not survive this.”
($1 = 1.5366 Australian dollars)
Australian sheep prices
Australian cattle prices
Australian rain
Australian meat exports
(Reporting by Peter Hobson; Editing by Sonali Paul)
((peter.hobson@thomsonreuters.com))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.