By Tony Chaston
With a picture telling "a thousand stories", we thought it would be good to review where livestock commodity prices are at compared to the last 3 years by way of our charts.
The wool price rises are spectacular, with crossbred prices back to they were in the 80's. And it may not be over yet with supply restricted and no stocks in the pipeline.
Wools second auction of the year produced price rises that are unprecedented for decades.
The 6-13% rises for different wool classes lifted the indicator levels dramatically, especially for crossbred (44-49c) and lamb (61c) wools.
This revitalization of wools fortune has given sheep farmers a much needed boost and it is also influencing the value of processed lambs.
The economics of lamb shearing are reinvigorated, but this will affect the flow of lambs to the works.
After selling cull ewes for $2.50/ hd to the works in my farming career, it seems amazing how much these animals are now fetching.
And with good prime lambs selling for well over a $100/hd in the saleyards, if feed has allowed farmers to finish, values are excellent also.
Rises are reappearing to the lamb schedules as demand for scarce stock is intensifying, and overseas markets are willing to pay premiums for quality stock.
Marketers tells us that the increase in price for lamb is coming from all parts of the animal with co products now making up 18% of their value.
Wools dramatic rise, and pelts that have lifted in price by 40%, are all contributing to the better prices.
Y Lamb
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21 Comments
Crossbred Wool was $5 per kg in 1990,so we are not even at that point yet.
Farm working expenses have increased 6 % per annum noncompounded in the last 15 years.
I was told today that a sheep station which runs 120,000 ewes was down 27,000 lambs this year due to adverse spring weather.
Lambs were selling for $75 in 2001.
Farmers need $120 for that lamb this season to get parity.
Dairy conversions continue and dairying is where those wanting to farm are turning too.
Dairy support continues to grow,with its tentacles reaching in all directions.
The currency has been devalued a good 60% since 1990. To be getting the 1990 value a farmer would have to see over $8 today. The price is rising because sheep farming was killed off by poor returns for too long. Prices will reflect supply and demand. Things will be good until greed sees supply increase.
Smart wool producers will know that trouble in China will see the demand side change overnight.
Expect councils to sniff the money and demand their % with higher rates.
Certainly the collapse of the NZ dollar and the lowest interest rates for 40 years,which happened in November 2000,gave the rural sector a kick along.
However,the costs have risen enormously.
The dairy payout was $5.00 then $5.33 at the start of the decade.
A top dairy operator recently made the comment to me that over the last decade,the cost of runnning his farm had gone from $2.20 to $3.70,and that therefore despite the increase in payout over that decade,his bottom line was no better.
And of course the cost of buying the capital infrastructure is much dearer than what it was back then.
As for sheep farmers,how many of them can actually afford to buy additional land ?
Red Dog - does that $3.70 include mortgage costs, or only farm working expenses? Is the farm irrigated or not?
A well known farming accountant was on radio saying the top 20% of sheep farmer clients are making very good profits. IMO profitability is, up to a point, determined by where you farm these days. Moving from the Bay of Plenty to Southland improved our profitability overnight and in both locations we operate(d) on a grass, no maize, pk etc system.
Our south island bank manager tells us they have more sheep farmers buying land than dairy farmers. Again, I think it can vary quite a bit depending on what region you are referring to. On our dairy farm, between us and our sharemilkers FWE are around $2.50 in total for in excess of 1200kgsms/ha.
And the Baltic dry Index is doing this
http://market-ticker.org/akcs-www?post=178541
The decline since September, when people were pointing to a rebound starting, is stunning - and disturbing.
Perhaps Andrew this might sum up how much we can rely on previous reliable measures and spin.
http://www.xcheque.com/xcheque-blog/all-blogs/4925-the-global-dairy-ind…
This kinda sums it up:
This all reminds me somewhat of that famous response to a question by former US Secretary of State Donald Rumsfeld:
"There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know."
To which you might add:
There are those that know and those that don't know. There are those that might think they know but don't and those that might know but don't think. Amongst all this there is a lot to think about and a lot to know.
Personally I prefer the comment of Neddy Seagoon in the Goon Show episode "Tales of Old Dartmoor":
"Great heavily whispered asides! (aside) Little do they know how little I know about the little they know. If only I knew what the little that they know, I'd know a little. I'll have to keep my little ears open you know."
This is great.
"Great heavily whispered asides! (aside) Little do they know how little I know about the little they know. If only I knew what the little that they know, I'd know a little. I'll have to keep my little ears open you know."
cheers
Made my morning.
Bernard
CO from the States
January 27 – Financial Times (Javier Blas and Chris Giles): “Governments across the developing world are stockpiling food staples in an attempt to contain panic buying, inflation and social unrest. But the hoarding is driving agricultural commodity prices even higher. The cost of wheat, the world’s most important staple, reached a fresh two-and-a-half-year high on Thursday, after countries from Algeria to Saudi Arabia announced extraordinary purchases. High food prices have been a contributing factor to the recent wave of social unrest across North Africa and the Middle East. In Algeria earlier this month, young rioters chanted ‘Bring us sugar!’ The cost of the sweetener in the wholesale market is at its highest in 30 years. Earlier this week, Algeria bought 800,000 tonnes of wheat – much more than usual – and Saudi Arabia announced plans to double the size of its wheat stockpile. Bangladesh and Indonesia joined the rush on Thursday, placing extraordinary on rice orders.”
It's a mad,mad, world Aj. Just pleased I live here and not there.
Word is that Fonterra will increase it's payout for this season. It's not this season I am interested in, it is what is the advance for next season going to be, that interests me more. Funny thing is no one is willing to be too specific on that though the bank told me they work on $3.85 which is less than this season. While I am happy to accept the $7+ payout for this season, I still do my budget on $5.50. This coming week's Fonterra farmer meetings have the potential to be interesting, but time will tell if their potential is realised. :-)
Marcf28 I wouldn't get too cocky When food costs get to be 60% of income there will be social unrest everywhere. The other effect as food costs go up there is less money to spend in the economies which will push things further into recession. Maybe this is the start of a repeat of the great depression.
Mate you know things are bad .................when the govt is relying on some rugby games and the earthquake to add to GDP
Marcf28... I am feeling quite buoyant right now about most things farming, however many of us have seen things look really positive before...just before it all keeled over....again. Farmers are ever the optimists though when they have grass, got to be, to be in the business, but not so long ago I remember beef hitting $5.00/kg within months it was back to $2.80. So stock purchased at a time when it was $5, then sold at closer to $3 is a big lose lose if you arent replacing at the same time.
Being mostly a finisher myself, with the dollar all over the place, the schedule all over the place, and the weather totally unreliable lately... its a thrilling ride. We are wise to be sus.
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