Australia Offers Aid to Farmers as Drought Bites into Beef Trade

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Australia Offers Aid to Farmers as Drought Bites into Beef Trade

Rick Britton is known as the 5th generation farmer dealing with beef sector. He is considered as a no stranger in the dry times on the large dry 200,000 hectare of his farm in the northern Queensland, Australia. But there is a savage drought for two years that is taking despair to the new level of drought in the area and this is leading many concerns that the rising beef prices around the world could go even much higher because of the existing Australian developing crisis, which the third largest known beef exporter around the world.

Rick Britton (a mayor of Boulia and a shire having a population of approximately 600 persons) says that the ground in Australia has been changed to be used as a moonscape having the grass decreased to black stubble patches. He continues to say that they had no option at that particular time but to decrease their cattle number from 7,500 cattle to 4,000 cattle due lack of enough feeds in the last 18 months.

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2013 was seen by many as the only hottest year from the time the records started in Australiaand the problem of droughtis to bring several questions relating to the farming viability in Queensland, which is known as the home of close to a half of the 27million cattle in the whole country. Thishas been coincidental with the extreme drought in big cattle ranching states in United States, whichisleading to the worldwide supplycrunch as the beef demand in Chinais quickly increasing.

On Wednesday this 2014, Canberra was seen giving his response to look for assistance from the farmers by sanctioning for A$320m aid that would help drought-affected farmers. Tony Abbott, the prime minister of Australia, says that some of the farmers might be inclined in saying that it is a special kind of deal to farmers – but no, this is considered as akin to the farmers’ natural disaster. He said this as a way of justifying the issue of the aid.

The financial assistance level that is provided to farmers in the nation is low through the international standards with their subsidies resulting to only 2% of the gross farm receipts,which is considered wellbelow the EU or the US. But the cheap loans packages and welfare that are given out to farmers is considered as politically contentious because the coalition of Liberal-National is looking for some policy agenda in their slogan that is entitled the end to the age of entitlement that recently saw the farmer refuse the given aid for the carmakers.

Farming groups also agreed to use the cheap loan package but many of the groups say that the Australian cattle industry health future mainly depends on the rain coming back to the Queensland state in the north east part of the country. Dale Miller (a senior policy adviser at the AgForce Queensland, which is a farming lobby group) says that close to70% of Queensland and 50% of New South of Wales is declared to be affected by drought.

With the possibility of growth of little grass due to the extreme dry conditions of the country, the farmers will be forced to buy the livestock feeds. Drought has raised the grain cost that is used often for feeding, thus leaving the farmers with only few options of culling the livestock so as to cut some costs. Dale Miller continues to say that this drought has been very bad and thus farmers had to wait for like three months in order to get access to abattoirs that are working only at extremely full capacity.

The volume of cattle slaughtered within three months to December hit a breaking record 0of 2.2m, up 15% from 1.9m some year before. In the same quarter, another record of 596,000 tons of beef was released while the live cattle exports rose to 23o% that is 275,000 tons, compared with the year before.

The issue of beef production spike had threatened to decrease the costs of meat and local cattle in 2013. But the increasing appetite for red meat in China has been considered as a helpful factor in cushioning the Australian producers and farmers’ drought effect. Yesteryear, China’s beef exports rose to 155,000 tons, from 30,000 tons in the year 2012. This is basically a representation ofalmost a half of the total China’s beef imports.

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Tim McRae (an economist at the Australian Meat & Livestock) says that the Chinese consumers do eat relatively a small amount of beef from Australia but there is close to 1.3 billion of them who are they are more likely to remain future buyers. The strong demand for beef in Asia coupled with the beef supply constraints resulted into the worldwide cattle prices to increase to 6% between June 2013 and December 2013, in accordance to Rabobank.The forecasts supply constraints that are here are mainly for the support the meat prices in the early 2014.

In the United States, which is the biggest producers of meat in the whole world, some extreme droughts in California and Texas have reduced the numbers of cattle to 87m – which is considered as their lowest levels since the year 1951. This led to the rising prices of United States beef, thusmaking the agriculture department of the United States to forecast on a 5% dip in meat consumption this year, 2014.

Tim McRea says that the United States sets the floor for the global beef prices typically but it also predicts that an Australian exports’ dip could lead to further rise in the global price. Tim McRea continues to say that Australia is a very big worldwide exporter of beef and if people see rainfall then the cattle farmers will have to hold onto these livestock and start restocking all their herds. He believes this would give out pressure on the cost of beef.

In the drought-affected places of New South Wales and Queensland, there are some signs that the relief might be on the way. This week’s rain came down in Boulia shire. Britton says that the rain that the farmers received yester night is a sign of a very good start. If the farmers get some good rain events in the next one month or two months then people will start seeing the farmers restocking their herds of livestock. Parts of Queensland west have received 250mm of rainfall in the last 5 days ago. Just try to imagine the supply of rain that is falling somewhere in Europe in a 24-hour period in a year!

The local councilor called Shane McCarthy says that in the Northern part of the nation, Hughenden has observed the Flinders River beginning to flow again after around two years. He says that they have some teachers in town who would not believe others that it does really run. Once again, there was following issue brought up: 2013 was observed as the hottest year from the time the records started in Australia. This is considered as a total nonsense since there is no one who was measuring the inland Australia temperature in the 50 years ago. For instance, the Melbourne temperature record was in 1939 – despite even having data for 150 years.

The eastern Australia drought will cut some swathe via livestock producers’ profits and contribute to above 4% decline in the farm production in the following financial year. ABARES (the Australian Bureau of Agricultural and Resource Economics), says while lamb, veal and beef earnings will reduce to around 5% in 2014-2015, the overall livestock value and livestock products will marginally increase.

It is estimated that the numbers of the cattle being slaughtered in Australia in 2013-2014 as the highest numbers in this decade. It is said that Cattle and calf slaughter houses have increased very fast in Queensland, Victoria, South Australia and New South Wales in the half of 2013–2014 as compared to the same time in the year before. In Queensland, the slaughter houses rose by 9% yearly to 2.1 million heads, while in the New South Wales, the slaughter and slaughter houses increased by 14% yearly to close to1 million head. In Victoria, slaughter rose by 28% to around 1 million heads. South Australia did only record 3% increase in slaughter number to approximately 207,000 head.

The cattle prices are well down now. In Queensland, the trade steers and the medium cattle averaged 10% lower while heavy cattle price reduce by 3%. In NSW, this drought has also affected the trade prices, with the trade steers and the medium cattle down prices to 7% on average, with the heavy cattle reducing by 1%.

For the sheep producers, this drought is equally harsh, as it has with more than many extra adult sheep that are going to the slaughter house in the first half of 2013-2014. That is basically despite the efforts that are made to rebuild the herd numbers nationally that grew up from 68 million to 75 million in the year 2010-2012.

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References

Smyth, J. (2014). The Financial Times Limited 2014. Australia offers aid to farmers as drought bites into beef trade, 1, 4.