WHILE there have been many explanations and digressions surrounding the 2011 live export ban to Indonesia, The North Queensland Register has stumbled upon what we believe is the best yet in breaking down the compounded situation the beef industry now finds itself in.
With the affects of the ban still heavily impacting the industry, the Register is of the opinion the following article gets to the heart of what the industry is feeling at the moment.
It was written by a person with much experience in rural agribusiness and finance, who wishes to remain anonymous yet, has gladly given us permission to share their words.
The author’s aim was to help people understand and prompt broad solution oriented conversations, “not channel everyone down a narrow single solution tunnel as that’s what got us into this mess in the first place”.
However, they warn to keep in mind it is a comment with approximates, estimates and for examples.
This is what they had to say:
COMMENT
WITH regard to live export, the reason people still bring it up is because it is still having an impact.
What we are seeing now is really the delayed impact of that fateful decision to destroy the market.
Everyone thinks that once the ban was lifted, it was situation normal. It was no such thing; it was only in the last two months of 2013 that the trade started to look anything like normal.
For the rest of 2011, all of 2012 and three quarters of 2013, only the occasional ship took cattle to Indonesia.
Indonesia was the biggest buyer of northern Brahman cattle by a huge margin. The loss of that buyer destroyed confidence across the industry.
No one wanted the young Brahman cattle or the mature cows that bred those calves.
The Australian domestic market discounted the Brahman cattle by 15-25c/kg compared to traditional breeds of cattle such as Hereford and Angus.
If a farmer’s cost of production is $1 per kg of live weight and freight to southern markets costs another 15c/kg, then your cost to market is $1.15/kg. When the market is only paying $1.50/kg (if you are lucky) then at best only 35c/kg goes back into your pocket, out of which you make your loan repayments, you buy food and clothing, you school your children.
On $1 million of debt, the interest alone is $70,000 at 7pc. Add $15,000 for living costs and $30,000 for boarding school of two kids. Therefore, $115,000 has to be generated at the rate of 35c/kg.
In this scenario, it would require the sale of 821 head of cattle weighing 400kg each. There are very few family farms that would turnoff 821 head each year with only $1m of underlying debt.
The more realistic amount is 600 head. So, 600 head at 400kg by 35c/kg equals $84,000. Even fewer would average 400kg as a sale animal, so 600 head at 340kg by 35c/kg equals $71,400.
Therefore, that family is short $46,000 just to meet basic living and debt maintenance.
In contrast, prior to the ban, farmers were getting upwards of $1.85/kg live at nearest depot at a cost of perhaps 5c/kg freight, giving them a margin of 80c/kg. So, 600 head at 340kg at 80c/kg equals $163,200 – a surplus, which pays tax, repays debt, replaces the worn out Ute, buys the missus a new dress.
After the ban, farmers did the math and worked out they would make a loss if they sold on current prices. The 2011 wet in the north was pretty good, people had grass and the 2012 wet was okay, people still had grass so they tick along, sell the bare minimum numbers, hold stock and hope that prices would rise as the live export picked up.
Then the drought hit. January 2013 wet season was a complete no show. It really only rains in the summer up there, so the ground was already dried out, it hadn’t rained since March 2012.
By early April 2013, it was clear that northern beef producers were in a big jam, carrying losses from 2011 and 2012, lots of cattle on hand, and still no sign of pick up in the volume or prices of cattle going to live export.
At that point, many knew they did not have the money to feed cattle through the long dry 2013 year. Thousands of cattle were trucked south to Roma, Dalby, and far into NSW and sold.
It crashed the market for all classes and all breeds of cattle.
Now southern producers with good quality, flat back cattle that met specifications were only receiving $1.50/kg and those selling Brahman cattle were getting $1.20/kg and less.
Thousands of breeding cows were sold at $0.80c/kg and still are being sold for that price.
If it costs $1.15/kg to get the animal to market and you get less than that for it??
So, early 2013 saw many northern beef producers roll into their third straight year of losses, and then it is time to start buying fodder for the few cattle left that are the nucleus for your future.
Now it is the end of January 2014 and again the wet season is late. The stakes are high and many people have run out of options.
The point is that 2011 and 2012 could have been surplus years for producers if the live export ban did not occur; less cattle would have been on hand at the start of 2013 if the live export ban did not occur.
Suicide in the farming community is a sensitive and painful issue for those left behind in very small communities where everyone knows everyone.
So no, no one yells about it from the rooftops or keeps a tally on the fridge door. In fact, it is hardly talked about, but those of us who live out here and work in the ag industry all know someone who isn’t here anymore.
Perhaps we should have started having this conversation with the broader community years ago. In any case, we are having it now.
With less cattle on hand and more money in the bank, farmers would have been better able to manage the drought, less cattle would have died, and someone’s brother, son, father, or husband might still be sitting down to the dinner table tonight.
Support is available for anyone who may be distressed by phoning Lifeline 131 114.
