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ANZ carves up beef price and profit myths: Shoppers are subsidised
Increased export sales mean Australian shoppers pay relatively stable and low beef prices.
Shoppers may feel they have had a bad deal from recent years of high supermarket food prices for staples such as beef, but in reality Australia’s taste for red meat is subsidised by our growing export trade.
Long term retail prices have actually remained relatively stable and modest compared to much greater price volatility endured by cattle producers, says the ANZ Banking Group.
However, while beef producers have copped greater burdens from a decade of increased gyrations in farmgate prices, they, too, are faring better than they might realise.
An ANZ report on the beef industry’s increasingly complex pricing and cost picture has noted while Australian farmers appeared to enjoy a smaller cut from the price consumers pay for food compared to their overseas peers, they made more profit from their farmgate prices.
Based on a long-running US Department of Agriculture “Food Dollar Series” comparison, supply chain data crunched by the United Nations Food and Agriculture Organisation showed Australian agriculture paid similar costs for labour, about 20pc less for imports and about 40pc more in taxes, but reaped higher operating surpluses.
The FAO data showed the Australian wholesale and retail sectors scored a bigger share of every dollar spent on food at 50 cents, compared to 46c in other countries studied.
However, while farmers here got 19c from every food shopper’s dollar, and processors took 18c, the global average for farmers was better at 22c.
Importantly, ANZ said despite big farm cost increases of late, jumping at least 30 per cent between 2020 and 2021, the beef sector, and livestock production in general, remained one of Australia’s lowest cost farm sector enterprises.
ANZ’s “Carve up” report also noted that while beef’s supply chain prices were now more volatile than ever, that volatility was also providing ample opportunities for producers to make the most of changing market trends, such as more demand for younger, lighter stock.
The report highlighted how global markets had become a key driver of a welcome overall rise in demand for Australian beef.
Conveniently, export orders had grown at the same time supermarkets had managed to “keep a lid on retail prices to maintain consumer demand”.
The report said simply looking at how the domestic retail price was distributed missed the largest part of the beef market picture – the 70-plus per cent of beef and veal exported each year.
Prior to 2014 farmgate and processor prices and retail values had all tracked relatively closely with each other, but as saleyard price categories became more volatile, consumer prices broke away from the producer payment trends.
This coincided with total export volumes and export prices growing significantly.
“This strongly points to Australia’s export markets being the major contributor to both farmgate and processor prices jumping away from retail,” the report said.
“In short, it could be said Australia’s export markets were subsidising relatively low and stable retail prices.”
A key factor had been changing domestic demand, and a shift from predictable saleyard returns to marked price jumps, and falls, starting around 2010.
Diverging cattle prices (per kilogram) between processor, feeder and restocker steers had become a notable trait of the market.
The increasing margin between the categories had provided an opportunity for producers to take advantage of selling younger lighter stock in a good season, encouraged by the growth in feedlots.
A record of almost 1.3 million cattle were now on feed in Australia.
“The ability to sell lighter cattle for a higher price per kilogram has seen producers rethink their production system,” the report observed.
“They now focus on producing a higher number of stock which grow rapidly to a saleable light or feeder animal category, with some building long term relationships with backgrounders or supplying feedlots direct.”
ANZ agribusiness head, Mark Bennett, said more complexity in the supply chain, and more volatility in pricing had created more opportunities for producers to diversify, reduce risk and take advantage of seasonal upswings.
“Beef isn’t what it was even just five years ago, when demand was driven by too few cattle on the ground. It’s now the opposite,” he said.
“Australia’s high herd numbers and a gap in the market left by the US drought, are leading to more demand for exports and continued upward pressure on domestic cattle prices.”
Mr Bennett said given the Eastern Young Cattle Indicator was currently trading around 25pc below trend, there “certainly is an expectation” strong export demand would put upward pressure on domestic saleyard and retail prices this year.
ANZ’s report also showed a division of profit breakdown after the farmgate, which suggested the whole supply chain was absorbing the relatively stable beef prices being passed on to consumers.
“Strong export prices are proving to be a useful offset for an industry seeking to maintain lower prices at the retail end,” he said.
“Today’s cattle industry might be more volatile, but there are big opportunities for the agile and responsive producer to make the most of any prevailing conditions.”
Andrew Marshall – Australian Community Media
Broker Market Share Rises to Record 74.1%
More and more home loan customers are using mortgage brokers, with brokers setting another market share record.
Mortgage brokers originated 74.1% of all new home loans in the March quarter, while lenders originated 25.9%, according to research by Comparator.
Broker market share has skyrocketed recently, rising from 69.6% in March 2023 to 52.1% in March 2020.
“Mortgage brokers offer personalised guidance and support throughout the entire home loan process, helping Australians navigate an increasingly complex lending landscape,” said Anja Pannek, CEO of the Mortgage & Finance Association of Australia, who commissioned the research.
“The value mortgage brokers offer their clients cannot be underestimated. They have brought choice and competition to the market, and act in the best interests of their clients.”
Australian tractor sales worth $2.1b in 2023, despite drop in units sold
The value of yearly new tractor sales in Australia remains above $2 billion, despite the number of units sold coming back in 2023. The results were reported in the Tractor and Machinery Association of Australia’s annual State of The Industry Report, which delves into tractor and machinery sales at a granular level.
There were 13,344 tractors delivered across the nation last year, worth an estimated $2.1bn. This was a 25 per cent unit decrease on 2022 but only 7pc behind the national five-year average. Overall, the value of new units lifted by 1.8pc, which was predominantly driven by the sales of lesser horsepower vehicles decreasing.
Across the agricultural machinery market, turnover reached $5.9b last year, with greater harvester sales helping offset lower tractor numbers. There were 1061 combine units sold, which was 29pc up on the five year average. The overall value of combine harvesters and headers was $1.17bn. This was driven by a 110pc increase in class 10 combine units sold and 222pc growth in class 10 combine values. Class 8 to 10 combines now account for 88.5pc of all units sold and 90pc of value.
The self-propelled sprayer market grew and was worth an estimated $756m. Tillage and seeding equipment also improved and was valued at an estimated $510.6m.
The total value of balers, hay tools and windrowers reached $246m. This was underpinned by windrower sales, which had a 67pc increase on last year’s value, and baler sales, which were up slightly on 2022. Growth in baler sales was underpinned by large rectangle balers, which had 33pc growth on 2022.
TMA executive director Gary Northover said the report highlighted a return to more ‘normal’ national sales in 2023. “We were coming off the back of two very, very strong years (for machinery sales),” he said.
Buying behaviour also changed in the second half of 2023, due to the federal government’s instant tax write-offs, or temporary full expensing, changing to only applying to equipment priced at $20,000 or less, replacing the former unlimited price arrangement introduced during the COVID-19 pandemic. “Selling 12,000 tractors a year is still a good year,” Mr Northover said. “In those two years of 2021 and 2022 we got close to 20,000 sales (each year). “We think we’ll sell between 11,000 and 12,000 tractors this year. While this is well below the peak, it’s still a healthy year for the industry.”
Exploring how the various states and territories fared in 2023:
Queensland
There were 3222 tractor units sold in 2023, which was 22.8pc down on the previous year, but only 2.7pc back on the five year average.
Tractor sales were valued at $429 million, which was 6.8pc up on 2022 and 27pc higher than the five year average.
The area in Queensland that performed the strongest for year-on-year unit growth rate was Ingham, up 16pc.
Western Australia
There were a number of areas in WA that bucked the national trend of lower sales.
Bindoon in the Midlands reported 57pc growth in unit sales, while in the southern area Corrigin rose 43pc and Kulin 29pc.
Overall, there were 1391 units sold into WA, only 1.7pc down on the five year average.
Values were worth an estimated $379m.
Victoria
The strongest performing areas in Victoria were Warracknabeal, up 42pc, and Boort, rising 18pc. Overall, the state recorded sales of 3018 units, down 29.9pc on 2022 and lowering 17.4pc on the five year average.
Sales were valued at $417m, down 10.5pc on 2022.
New South Wales
NSW was the state with the highest overall sales at 3979 units. This was 26.4pc down on 2022 and 7.7pc back on the five year average.
Sales were valued at $672m.
The best performing areas were Forbes with 15pc growth year-on-year, Narrandera rising 8pc and Gunnedah up 6pc.
South Australia
The state performed relatively strongly for 2023 sales.
Saddleworth in the Mid North had significant year-on-year unit growth, up 60pc. This was followed by Kadina on the Yorke Peninsula, rising 49pc. The Eyre Peninsula also had spots with good growth, with the Tumby Bay area rising 35pc and Wudinna 40pc.
Overall, there were 1116 units sold, down 5.7pc on the five year average.
Tasmania
The value of tractor sales in Tasmania in 2023 was estimated at $54m.
There were 493 units sold, down 21.7pc on 2022.
Northern Territory
A much smaller market than the rest of Australia, only 125 units were moved in the Northern Territory in 2023.
The State of The Industry report is produced by global leader in data and analytics Kynetec.
April 2024 report
National tractor sales in the month of April were 12pc behind the same month last year with about 850 units delivered across the nation.
Queensland was down 13pc against the same month last year, to be 18pc behind year to date. NSW was down 22pc and is now 28pc behind for the year and Victoria was up slightly, 3pc, to be 18pc below last year.
Western Australia reported a small rise in April of 1pc, to be in line with the same time last year.
South Australia had another big drop down, 18pc, and is now down 24pc year to date.
Tasmania was off 42pc for the month with sales in the NT finishing 30pc down.
Sales of the 200hp (150kw)-plus range were the best with a 1pc rise on the same month last year, up 32pc year to date. The small under 40hp (30kw) category was down by 3pc for the month to be 28pc behind year to date. The 40 to 100hp (30-75kw) range was down 32pc and is now behind 35pc year to date. The 100 to 200hp (75-150 kw) category was down 6pc, to be 21pc off for the year.
“This mix of sales means that, whilst in volume terms the market is down on the same time last year, in dollar terms it is in fact up 14pc,” Mr Northover said.
“This highlights the approach many larger farmers take with their fleet replenishment strategies. Many machines are now being sold on three or five year leases, which are programmed into customers’ capital cycle so even though the agricultural market may experience some gyrations, we are seeing a more stable outcome when it comes to larger machinery purchases.”
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