With the national cattle herd declining and many producers destocking due to drought, there is a real concern as to how people will get back into the industry.
Thanks to his ongoing discussions with a group of central Queensland producers, Clermont-born-and-raised Mark Cook has an idea.
The owner of Cue Agribusiness, now based in Warwick, has been developing a proposal that may provide an efficient restocking mechanism for struggling producers – the Agistment Partnership Model.
This model could see graziers with plentiful grass and limited financial ability restock their breeding herd by working with less affected producers with excess female cattle - such as cull heifers and cows - for a win-win situation.
“The entire proposal centres on decent soaking rain and a return to average seasons,” Mr Cook said.
“With this in mind, our discussions have centred on a partnership concept that would allow a destocked landholder to get back on their feet in terms of their breeding herd numbers.
“At the same time, it allows the livestock owner to run cattle on agistment on the land by paying a proportion of the agistment with female stock,” said Mr Cook, who has been developing and testing the partnership concept with neighbours, family and friends and financial institutions in southern and central Queensland.
Due to ongoing drought, many graziers have had to partially or completely de-stock at prices far below the current market.
Following a decent break in the season, more than likely they would have to buy back breeders for more than three times their destocked selling price, Mr Cook said..
“It’s going to be time-consuming and difficult to buy back breeding stock; even if they are available at appropriate pricing, dry cows will have to be mated and calve, so there’s a minimum of nine to 10 months, and then it’s a further 12 - 18 months before you have an article to sell.”
Given the current level of gearing in the beef industry, many producers having to fully restock utilising finance may find it difficult to remain sustainable over the medium term, he added.
“With a solid break in the season, we anticipate many currently destocked producers will have large volumes of grass and minimal stock to utilise it.
“Meanwhile many in central and southern regions have had reasonable seasons, combined with what can be described as the best cattle prices they have seen in their lifetime and therefore may not have the financial pressure to sell their female stock,” Mr Cook said.
The Agistment Partnership Model would see stockowners with excess female cattle retain their annual cull cows and heifers and instead send them to the restocking producer’s property on agistment.
A proportion of the progeny from these cows, including all female calves, would be used by the stockowner to pay the landholder for the agistment of these cows.
“Instead of selling your cull cows when they reach eight or nine years, for example, you would keep them for another year and send them on agistment,” Mr Cook explained.
“The remainder of the restocking landholder’s property would be utilised by the stockowner to run trading cattle numbers, which are progressively reduced each year as the landholder’s breeding numbers increase.
“This concept allows the landowner to utilise the cashflow from the agistment payment for these young trading cattle to meet their monthly commitments, while at the same time building breeding female numbers in a cost-effective manner.”
Mr Cook said interested parties would want to have a good understanding of how the partnership model works, including its potential cashflow impacts and risks, and he was currently in positive discussions with a number of producers and financial institutions.
So far, they were very interested in the concept so it was now a matter of sharing the detail and methodology behind it.
“We have developed a side-by-side income statement of both the landholder and the livestock owner, which shows the risks of changes to key variables so the impacts on both parties can be seen simultaneously”
That way, the interested parties and financial institutions had visibility of what the key impacts were, he said.
The CueAg Agistment Partnership Model would require two herds of stock on one property, so a level of trust and commitment was required.
“But it was not unusual for a standard agistment agreement to have two herds running on a single property, so this proposal is not a completely new concept.”
Mr Cook cautioned that this was not an agreement lasting one or two years - it would more likely be a minimum of five years, with nature and herd rebuilding being the defining factor.
“What you would want to avoid is a restocker getting back on their feet in three years and saying they’ll go their own way, or the stockowner utilising the early periods of agistment for larger numbers of stock, and then pulling out of supplying lesser numbers of stock in the later stages of the partnership.”
There also needed to be a level of commitment from financial institutions, as many landholders, through no fault of their own, were constrained in their ability to service debt.
“This model allows a proportion of cash-flow that would underwrite the landholder’s commitment to the bank through the agistment of young cattle, but you need a commitment from the bank not to foreclose during the Agistment Partnership Contract period.”
Mr Cook said other aspects of the model also needed further investigation, such as the timing of the transfer of title for the livestock and the tax implications of the transfer.
