Textbook year of supply and demand

30 Dec, 2011 02:00 AM
Livestock prices have been strong for sheep and cattle in 2011 and the future looks positive for producers in 2012.
Livestock prices have been strong for sheep and cattle in 2011 and the future looks positive for producers in 2012.

WHEN you are studying business you are taught one key concept - supply and demand.

If you have limited supply the demand is higher and it pushes the price up while if there is over-supply, demand is low and the price is pushed down.

During 2011, sheep and cattle in WA have been a textbook example of supply and demand.

With a mass exodus of stock in 2010 because of drought, WA was left with a less than average stock supply and demand was up which saw massive prices in sheep and cattle.

While the news has been good for the producer, the pressure is now on processors to stay open.

With the high prices to buy stock and the lack of numbers, farmers only need to look as far as Narrogin to find out how tough it is right now.

One of the big news stories in 2011 was the voluntary administration decision by Hillside Meats.

Hillside was one of the leaders in the development of the lamb industry and Hillside chief executive Peter Trefort was a major player in the creation of marketing alliance WA Q Lamb.

Fletcher International general manager Greg Cross said the year had been the toughest he had ever dealt with.

"The year has certainly been the most challenging year in the 14 year history that we have been in operation," Mr Cross said.

"We have had challenges not only with stock supply but also with the Australian dollar and increases in processing costs.

"To add to that is the high prices for our raw material, but that's also the upside of this year."

Mr Cross said if you look for positives out of this year from a whole industry perspective, then the high prices are a good outcome for the producers and should have a positive impact on the future of farming.

He said the high prices would hopefully encourage more farmers to get back into livestock and also reward the producers who have stayed in livestock during the tough period.

Mr Cross said it was obviously a tough time for processors at the moment but they just needed to continue to push through it for the benefit of the entire industry.

"I think that is the big positive," he said.

"But as far as the Australian dollar is concerned it is just the way it goes and there is nothing we can do about it so we just need to get on with it.

"There are two things in the world you can't predict - one is the weather and the other is the economy."

He said it was impossible to predict what the Australian dollar would do in the future but he believed the future did look good for producers.

"I still honestly believe there is going to be strong prices for livestock well into the future irrespective of whether farmers get back into sheep or not," he said.

"There is a massive demand for Australian grown and processed product.

"It is a good promotion because we are a disease-free country and our processing standards are second to none in the world.

"I believe we have a good management foundation to help us carry on with our best management practices and we hope the next winter will have plenty of rain and I think we will see a real positive turn around.

"We are quietly confident with the future and we just have to hang in there over there next 12 to 18 months and hopefully all the planets will line up."



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