News

A volatile start to the year adds further pressure to already stressed feed supplies

By Dairy News

FOLLOWING A challenging season of high input prices for many dairy farmers across the country, the industry looks to a new year with hopes of improved operating conditions.

Unfortunately, the start of a new decade hasn’t provided the much-needed relief but added further challenges.

Bushfires have ravaged parts of the country and exacerbated the already drought-affected feed supply.

What started as a promising season for feed production last year was significantly scaled back and is forecast to end down year-on-year.

Hay and grain yields were variable across the country, with most of the production taking place in the south-eastern states.

Feed prices in late 2019 softened slightly although withstood the normal pressure associated with harvest.

Entering the new-year period, prices firmed once again as competition increased due to the ongoing drought and more recently, bushfires.

Vast farming areas across Victoria, NSW, Queensland, Western Australia and South Australia were heavily impacted by the fires.

While large areas of bushland were impacted, significant damage occurred to pasture, hay supplies and stored grain.

Fires in NSW and Queensland burnt typical cropping land, although because of the drought, little to no crops had been sown.

Properties in these affected areas required urgent feed.

As roads were closed many deliveries required police escort or in some cases, fodder drops by helicopter.

This sudden spike in demand combined with the sustained pressure from drought-stricken areas increased enquiries for hay significantly.

A heightened presence of trucks on the road and fear of a supply shortfall triggered reports of “panic” buying.

Supported by an increase in hay donations, this resulted in prices firming in nearly all regions.

At the time of writing, cereal hay is trading up to $78/tonne higher on average this month compared to December.

However, most regions are trading at a discount or similar price to this time last year, excluding Tasmania and Western Australia.

During the Christmas period domestic grain prices also followed offshore markets higher.

Despite this price climb, all regions are trading at similar or lower prices this month compared to January 2019.

It must be noted that hay and grain prices are compared to a significantly high price last year and the cost remains well above historical averages.

Rainfall across the eastern seaboard in late January helped fire-hit regions and improved the soil-moisture profile across the country.

This was particularly favourable in southern Queensland, which has experienced challenging conditions for some time now.

On the back of the late rain some farmers are looking to plant sorghum, but for the most part, this will do little to improve the area planted this summer.

It is expected that this will be one of the smallest sorghum crops for 20 years as unfavourable conditions throughout early summer hindered planting.

The increased demand for feed doesn’t always result in an increase in supply released to the market.

It’s hard to quantify how much hay is being traded.

However, it’s postulated that seller engagement is low as many growers keep supply for personal use.

This has also been true in the grain market.

Therefore, prices going forward will partly be affected by sellers’ willingness to release feed onto the market.

Despite challenging seasonal conditions, there is still hay and fodder available around the country.

Industry sources suggest that it is unlikely supply would run out completely, although as prices climb it becomes increasingly unaffordable to purchase.

Therefore, it is the tradeable volume that has the potential to run out.

With little to no data on production or the amount of hay and fodder traded in Australia, it is difficult to quantify volumes in challenging circumstances such as the bushfires.

This has prompted discussions of the need for a more transparent market database.