Only trade if you're cut out for it, cattle producers told

Only trade if you're cut out for it, cattle producers told

Beef
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Sell, trade or rebuild - tough decisions for producers right now

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AGENTS have reported a lot more traders on the rails as producers with feed in the pipeline look to get back into the livestock business at a time when cattle prices are travelling north fast.

For those with little-to-no stock, and paddocks with feed, trading is a useful tactic because it allows a somewhat measured re-entry, consultants say.

The outlay is less than buying cows and calves and there is less time before an article to sell is ready.

Buying younger stock which weigh less also means a lower cost-per-head and the potential for higher weight gain profit where there is grass.

Many producers in regions hit hardest by drought are also having to rest country but may have some capacity to get stock on grass, so trading small numbers is attractive, agents said.

In some cases, choices are also being made not to utilise all grass.

Clever business people sell when everyone else wants to buy, and vice versa, one consultant said. Right now, everyone wants to buy.

For that reason, combined with a need to cover drought-inflicted debt, some consider the best option right now may actually be not eating all the grass.

Inverell agent Ben Hiscox, Bob Jamieson Agencies, said there was an enormous amount of uncertainty at the moment.

"No one in NSW or Queensland has seen a season as good as this for a long time - summer rainfall hasn't existed in many parts for five years," he said.

"But still, while it's a beautiful break there is still a lot of cautiousness about the chance of no more rain until winter.

"So some are taking the money to cover feed and hay bills and repay debts."

Agents across both NSW and Queensland say very few are jumping into cows and calves in a big way.

However, Mr Hiscox said there was an emerging realisation as little trade steers become dearer that pregnancy-tested females might be better value, providing both a trade and rebuild option depending on how the season goes.

Trading mentality

For those looking at turnover cattle, farm management consultants say it is critical to know what it really means to be a trader.

"It's a very different proposition having 800 trade steers as your entire herd than it is running a 500-head cow-calf operation with some trade steers on the side," said Mike Stephens, Meridian Agriculture.

"If you are going to become a trader you have to enjoy the cut and thrust of the market.

"If you can't be bothered looking at forecasts, or lie awake at night, it's probably not for you."

Farm management consultant Mike Stephens, Meridian Agriculture.

Farm management consultant Mike Stephens, Meridian Agriculture.

Going into trading in a big way also means factoring in the potential for 'shock' risks to markets, he said.

"When you run a cow-calf herd the value of the cows is of less importance because you only sell a small portion of your cows each year. But when you are trading, any market fall can be very costly.

"For instance, those selling directly into China on a contract basis can't move product at the moment and shortages of agricultural chemicals are coming our way.

"These type of 'shocks' affect traders more than those who have a self-replacing herd.

"They might not register for a producer who had only a tenth of their stocking rate as trade because a dramatic market drop wouldn't break you but they can be pivotal when trade is your entire business."

Further, there is a certain 'trading mentality' needed, Mr Stephens believes.

"Trading mentality writes off the initial cost and calculates profit as the difference between what lot A was sold for and what the replacement lot B was bought for," he said.

"If you put $1000 on the table; then sell for $900 but buy in again at $800, there's $100 in profit.

"If you continue trading over a long period and sell and replace in the same market you can do well, but if you only trade once and the price falls you can be in trouble.

"Trading can be very profitable but don't punt more that you can afford to lose."

SEE ALSO: Still money in turnover cattle

Fed cattle price hike sets scene for red hot competition

Mort & Co tips favourable cost of gains

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The story Only trade if you're cut out for it, cattle producers told first appeared on Farm Online.

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