Market Supply Shifts: a discussion with National Sales Manager Dave Clothier

Jon Paul Driver

Welcome to the Feed Central Hay Matters podcast, your go-to source for all things hay related in Australia. I’m your host, Jon Paul Driver. In today’s episode, we’re joined again by Dave Clothier, National Sales Manager at Feed Central. Welcome to the podcast.

Dave Clothier 

Thanks very much JP, good to be on board again.

Jon Paul Driver 

Now, let’s talk through a market update. What are you seeing? Supply and demand? What are the big drivers out there?

Dave Clothier 

Well, I suppose we’ve got to really start with the state of play across this great continent of Australia. We are a country of extremes and we’re certainly experiencing that from north to south, east to west. Like the continued warmer temperatures and higher rainfall as high as 30% above average rainfall over the last few months across Queensland and New South Wales and the top end really has continued to see pasture growth continue, which is putting a reasonable feed supply in front of graziers in that neck of the woods. As we move further south, we move into Victoria, and Tasmania, they’re certainly drying off, Victoria and the north and the west, particularly. Tasmania is drying off, and then we move across to South Australia. It’s getting drier as we get through this period. And Western Australia is in considerable drought. So much so that supply or demand is very high in WA and there’s a lot of livestock moving across to the eastern seaboard, just through necessity. So yeah, it’s quite a set of extremes at the moment.

Jon Paul Driver 

Tell me about livestock moving from WA across.

Dave Clothier 

It’s just because of the drought conditions they’ve got very little opportunity to… very short supply of fodder and fairly high prices over there. So they’re considering their options rather than feeding the moving stock east which has happened before. It’s nothing new. But it’s just providing a way forward for them.

Jon Paul Driver 

What are the implications here? All of these extremes.

Dave Clothier 

Well look at it’s all positive, absolutely. The herd is at its highest since 2014. Where the majority of the cattle are in Australia, which is in Northern Australia, Queensland and Northern Territory, extremely good conditions, high volumes of feed, large numbers of cattle that’ll continue to flow into the southern markets going forward. So that’s really good from a livestock perspective the export job is looking very positive. It’s increasing across the globe, even into the states, it’s considerably higher due to your lowest herd number for like, 70 odd years from what I read JP. So that’s creating opportunities there for the Australian beef sector as it is across Asia.

Jon Paul Driver 

We’re not going to tell the American cattlemen about this.

Dave Clothier 

Yeah, it’s certainly positive for the next couple of years. For sure, I think prices continue to be very solid. That’s just because of the warmer temperatures the body of feed that’s around will continue to create the demand from the restockers across the grazier network. You know feed lots are still very strong, very profitable in Australia, the majority are either full or close to capacity. There’s still a lot of growth in that sector there’s an expansion still happening. I’m on a bit of a tour at the moment in the Northwest slopes in New South Wales. Lots of conversations about expansion and so forth. Augurs very well for the industry without doubt. Yeah, so that’s pretty much I suppose the state of play in general terms the rainfall pattern, I read something yesterday where where it’s about 20% or 19%, above average, as a national number 30% in the north and obviously lower in other parts in those southern states, but overall, it’s very good. There’s talk of high temperatures through to the end of July, which will continue to see pasture growth for a little while yet, which gives grazier security. Weaning has either happened or happening across the country as we speak now, that augurs very well for demand in the fodder industry. So all that is only positive news to me.

Jon Paul Driver 

I want to juxtapose here for just a second where you were talking about very low cattle numbers in the US. I just wrote a report talking about how we’re down… now I’m blanking on the numbers. There’s 272,000 fewer cows, mama cows in the Northwest part of the US, we’ll just call it kind of west of the Western US, which for us, we’re feeding one or two tonnes per head per year. That works out to somewhere in the neighbourhood of a half a million tonnes of demand destruction for our hay. I mean, this is almost a completely opposite story that I hear you’re telling. They’re restocking and there will be demand for hay down the line.

Dave Clothier

Look, demand has lifted considerably I’d say over the last three to four weeks. And that’s because of the history of Australia like we understand that traditionally ANZAC Day is the day that the frost start on the Eastern Seaboard, particularly. That hasn’t happened to a large extent, has happened in some small areas of southern New South Wales or southeast New South Wales. But it’s certainly an expectation of graziers that it’s getting cooler, as we go forward, people are starting to prepare for their fodder needs now, knowing that it’s gonna get colder and colder and their pastures will be compromised. So there are lots of those conversations happening at the moment. It’s starting to feel like the clients we’re talking to now have done more research than they probably have in the past, they’re asking for feed test results. They’re having discussions with our account managers on a one-on-one basis about what their needs are, what their requirements are, for their operation whether they’re weaning or feeding dry cows or whatever they’re doing. And they’re making a lot more informed decisions, which is really a positive thing for the industry as far as we’re concerned. Because it just means we’re supplying the right product for the right needs, so to speak, but it’s right across all grades of hay. That’s the other interesting thing at the moment, it’s all grades, whether they’re using it as a supplement in a mix, you know whether they can use a lesser product, or they’re just feeding a weaner type product where they are looking for that new season hay, really good aroma. And, you know, low NDF, and all the things that attract, you know animals to the bunk type scenario or to the high rack depending on the requirements. So there’s, you know, you talk from a supply perspective, there’s still great volumes of product across all grades, and all grades are selling at the moment, which is good to see because there is older season product, particularly down in the south and Victoria in particular, and that’s starting to move, and none of that has moved for considerable time. So that’s a really positive thing to see. The conversations we’re having with a lot of clients now it’s about forward contracts, they know it’s going to get colder, they know they’re going to need fodder. So they’re starting to look now because they’re all starting to appreciate that the volumes of quality hay are slipping further south. So as it slips further south, the freight component increases. So, you know, a lot of people are even starting to think about end of financial year and the impact it has on their business and whether they should be forward contracting, quality hay at today’s prices, rather than waiting until it’s further and further away from them, which will increase the delivered price. So they’re really healthy conversations, I think. And the smarter customers are doing that as we speak now. Through our web sales platform, that last three to four weeks, there is a lot of enquiry coming through, particularly out of those drier areas in Victoria I was just talking about, and South Australia, those areas in particular, which is great to see, because that’s where the volume of hay is. It hasn’t got to travel as far it all just augurs very well, for that part of the world. In the north, it’s really about the weaning process at the moment. So that’s where we’re trying to have the conversations about just sourcing the best hay we can, as close as we can to where it’s needed to make it more affordable.

Jon Paul Driver 

Now, what kind of price movement are we seeing? What I heard you telling me is that demand has picked up, there’s more enquiries, that generally leads to some sort of price movement. Are we seeing it yet? Is it there? Or are we still talking about freight differentials?

Dave Clothier

Oh, look? It is. There’s a few ways to answer that question, JP. If we think about the south, like there is still a lot of those compromised paddock stack articles down there that traditionally aren’t moving north because of the quality and so forth. But a lot of those over the fence type sales and and people are wanting to move the product so that there is very negotiable conversations going on in those types of scenarios.

Jon Paul Driver 

Ample supply of low quality hay just trying to clear the market. Yeah, yeah. Create much of a price bump on the low end.

Dave Clothier 

You know, particularly those outside stacks, they want them gone. So the negotiation around those is pretty strong at the moment as you would expect. If we think about the shedded product, like the majority of of farmers in Australia, are reasonably affluent over the last few years. And the price is totally determined on the need for cash flow from those growers. If they don’t need the cash at the moment, they’re sitting on their prices and they’re not budging, they’re waiting just to see what happens with the market in the next couple of months. The growers that are looking to clear their sheds and create some shed space now are getting a little bit nervous, then negotiating as is the freight industry for that matter. A lot of trucks sitting idle so then negotiations both sides going on every day in the right direction. Probably you know if we cast our mind back to the Christmas period, December, we sort of started to see a slide in prices, you know, probably from you know $60 to $80 a tonne on cereal hay, like new season cereal hay. And that did come into effect and it absolutely did but as the product became further and further away that advantage has been lost through the freight having to travel further. So delivered prices, as a general statement are probably very similar to where they were through that summer period, today.

Jon Paul Driver 

Very interesting. So we’re still talking about freight rate differentials and the buyers paying the same price. But where the hay is coming from is making the difference?

Dave Clothier 

That’s absolutely right. Yep, there’s very little shedded hay, with good access, north of Dubbo. And very little in that central New South Wales area, you’ve nearly got to travel closer to the border in southern New South Wales, before there’s any great volumes of quality hay.

Jon Paul Driver 

Well, any closing thoughts?

Dave Clothier 

Oh look, I think the smart move now, if I was looking for fodder for my own enterprise, I’d be starting to think about what my options were for my own business, whether I needed to, for the start thinking about the end of financial year we’re only 9/10 weeks away from that period, which is amazing. Coming around very quickly, I can see I can secure my needs at the market price today. Drawing quality product from as close as I can to the destination. So I’d be looking now there’s certainly no need to panic at all, there’s plenty of volume out there, I’m just thinking that people who are after quality hay, should be starting to look now and looking for the right product that suits their needs, and securing it for a period when they need it. You know we we certainly may be able to discuss deferred payment terms and things we don’t have to lock in today and pay today unnecessarily? We can do it a lot smarter than that.

Jon Paul Driver 

What else I’ve heard you say from the grower’s standpoint, is if you need to generate cash flow, maybe you have some ability to today? Because there’s a little liquidity in the market.

Dave Clothier 

Yeah, you’re spot on JP, it’s really about just matching one with the other. You know, we still haven’t seen that cold weather come in that we would traditionally see by now. But we all know it’s coming. Just when. We’d expect through that Eastern New South Wales and southern Queensland area, particularly where those pastures get compromised more all those graziers know that it’s coming. It’s just a matter of when. So, you know, if we’re gonna wait another month to secure your needs, just be prepared that it may be further away than it is today to source that product. Which has an impact on delivered price, of course.

Jon Paul Driver 

Sure. Well, with that, I’ll say, Dave, thank you. It’s been a pleasure. Again, we’ve been joined by Dave Clothier National Sales Manager at Feed Central. Thank you again for your thoughts.

Dave Clothier 

Thanks very much JP. I appreciate the time with you.