Export investments good for industry

Export investments good for industry

Pastoral cattle are fed prior to boarding an export vessel at Port Hedland earlier this year.

Pastoral cattle are fed prior to boarding an export vessel at Port Hedland earlier this year.


THERE were positive signs for the live cattle trade out of WA in 2017 and it looks set to continue this year despite its challenges.


THERE were positive signs for the live cattle trade out of WA in 2017 and it looks set to continue this year despite its challenges.

The Mid West Ports Authority came aboard as a long-term player for the live export trade, having installed five Shore Tension Units to assist in safe and successful moorings at the Geraldton Port.

Exporters have already shipped 5755 cattle to mainly Vietnam and South East Asia from Geraldton and that is set to grow in the coming year.

Exports resumed at Port Hedland with two shipments to Indonesia – including 500 breeder heifers – as part of the Indonesian 1-5 breeder-feeder program.

The outcome of the Indonesian breeder-feeder program is uncertain but so far it doesn’t appear to have worked to build the herd to the desired level.

Frontier International also made a historic shipment when it entered the sea freight trade with 1726 slaughter cattle sent from Fremantle to China last month.

With the success of the voyage the company is hoping to expand on that in the coming year.

WA also saw the expansion of the Bluetongue Virus (BTV) Zone in July, which encompassed the Broome Port.

While another challenge, it has had little effect to the overall trade as most of the live cattle exported from the State went to Indonesia.

The BTV sensitive countries are China, Turkey and Israel – however exporters have found a way around the issue by sourcing stock from the southern end of Australia.

Producers have also transported their cattle south out of the zone to feedlots for the required 90 days prior to shipment in order to meet the quarantine standards.

The Pilbara Ports Authority installed a new loading ramp at Port Hedland – worth about $300,000 – which it hoped would provide exporters with an alternative to access the BTV sensitive markets.

With more contracts looming, WA cattle producers can plan for the future with confidence that markets will still need the quality, clean and safe meat that they provide.

ABARES forecasts that export earnings will increase for live feeder/slaughter cattle by five per cent though the prices are forecast to fall.

Despite the positive signs there are still challenges for the industry.

Australia typically averages about one million head per year exported live worth $1.35 billion – however in 2017 only 800,000 head were expected to be shipped.

This was due to a reduction in herd size and drier seasonal conditions.

The live export trade makes up more than 50pc of incomes for northern cattle producers.

The issues facing the industry were highlighted at the LIVEXchange 2017 conference in Perth during November.

The depleted herd size and its need for a rebuild was mentioned alongside high costs of transport and freight, compliance issues and government red tape.

WA Agriculture and Food Minister Alannah MacTiernan also set her sights on the need to replace old livestock vessels to improve animal welfare standards on board – especially for longer voyages.

For government to make a difference in helping Australia be more price competitive it needs to look at reducing transport costs – which make up about 40pc of the live export costs.

Because of the high costs of doing business, Australia expects a higher price for its produce, which is affecting market share – which can be seen in the rise in the demand for cheaper Buffalo meat in Indonesia, as well as less expensive imports into China from Brazil and Uruguay.

Though experts predict that because of the high standard of product coming out of Australia, market expansion is still occurring and demand will continue as income levels in the developing world rise over the next 10 to 20 years.

Meat & Livestock Australia’s data for the previous 12 months to October shows that nearly 70pc of live cattle exports were feeders, of which the bulk (556,094) went to Indonesia.

Turkey took 36,555 feeders and Israel 27,797.

Twenty per cent exported were slaughter cattle and 10.5pc were breeders.

WA beef cattle producers generated about $857 million in slaughter sales in 2015-16.

The State has a beef cattle herd of about 1.9 million head, distributed across about 2600 properties, according to the Australian Bureau of Statistics.

About 50pc of all Australian agriculture businesses profit from the cattle trade – that’s about 43,000 farms across the country – with a herd size of about 25m head.

The top 20pc of this group, according to Resource Consulting Services general manager David McLean, managed to increase profit, while at the same time reduce costs and expenses during 2017.

The cost of production has slightly declined while it is still high compared to before 2015 figures.

Mr McLean said although his research was mainly data from the northern beef producing businesses the trend was across all cattle producers.

He said the survival base cost for producers was $1.84 per kilogram, so in order to cope with market variations they would need to keep operating margins high.

According to MLA’s Australian Cattle Industry Projections 2017 October Update, the adult cattle slaughter market had a slow start to the year but it “ramped up since June”.

It said there had been a “focus on males in order to preserve the breeding herd”.

Male slaughter numbers were up 2pc against last year, while female slaughter was down 8pc over the corresponding period.

“The female proportion of cattle slaughter for 2017 is anticipated to be 45pc of the total adult kill, which would be the lowest level since 2012,” MLA said.

MLA suggests that many producers appear to be increasing female herd numbers, which have been at historically low levels – the lowest since the early 2000s.

While the final figures were not in yet, adult slaughter numbers appeared to be on track to reach 7.25m head, which would be down slightly on 2016 numbers.

Below-average rainfall across much of the country during winter gave many producers little option but to turnoff stock – but that is not expected to increase at this stage.

While the rainfall outlook for the end of the year is more positive, further dry weather could derail the broad industry rebuild that is underway and challenge many producers with some tough decisions.

The WA cattle market has followed the trend of the Eastern States and is projected to improve depending on seasonal conditions.

The number of cattle in feedlots across the country has been at record levels in 2017, with just under 1.1m head on feed at the end of the June quarter.

The turnoff rate declined slightly from the March quarter to 74pc.

This meant there were more grainfed cattle being processed as a proportion of adult cattle slaughter and cattle were staying on feed for longer, which contributed to the rise in average carcase weights.

The large numbers on feed have been caused by strong grainfed beef demand from Japan and Korea, historically low grain costs and deteriorating pasture conditions.

Lower feeder cattle prices have also assisted in recent months.

Australian adult cattle carcase weights have held up well in 2017, with the national average hitting a record monthly high in April to 299.2 kilograms.

They also averaged a record 296.5kg for the year to August – 10kg or 4pc higher than the same period last year.

Typically, prolonged dry conditions saw carcase weights fall, underpinned by a greater proportion of females making up the kill and producers finishing cattle to lower weights.

Carcase weights have bucked that trend in 2017 which has been largely due to the female herd already being at a historical low, having not yet recovered from the previous drought-driven destocking phase.

Nationally, adult female cattle carcase weights averaged 260.3kg for the year to August, while adult males averaged 327.2kg – both up 3pc from 2016.

There has also been more cattle on feed this year than ever before and cattle have been retained on feed for longer, producing more beef per beast.

Despite being a predominantly grass-based industry, finishing more cattle on feed has offset the impact that poor pasture conditions would normally have had on average carcase weights.

This has pushed the 2017 forecast for the national average adult cattle carcase weight to a record 297.4kg, which represents a 3pc or 9.2kg increase from the record reached in 2016.

Heavier carcases have seen beef and veal production also revised slightly higher to 2.18 million tonnes cwt – up 3pc from last year.

Australian exports to Japan and Korea have also been put under pressure by increased United States exports – which has seen export figures drop over the past nine months to the lowest level in five years.

While Australia remains the larger of the two suppliers in both markets, the loss in market share has shifted entirely to the US.

WA has also seen cattle transfer numbers to the Eastern States fall below what they were at the same time last year – which could hint at a possible herd rebuilding across the State.

Between January and November last year, 11,400 cattle moved east through Ceduna (northern cattle transfers excluded), compared to 19,100 at the same time last year.

This is a decrease of 40pc year-on-year.

While relatively high compared to recent years (except 2016), numbers are well below those levels in 2010-2011 when 129,200 cattle left in 2010 and 48,900 in 2011.


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