Mecardo Blog

The Australian Competition and Consumer Commission (ACCC) announced in early April of a market study into the cattle and beef industry to be undertaken this year. Issues covered by the study are wide ranging but a particular aspect of the investigation that caught our eye was the focus on greater transparency with regard to profits and margins along the beef supply chain.

For some time, there have been messages from wool processors that much of the Australian wool clip is too long. If this is true then shorter lots should attract a premium – this would be a normal economic lever to attract more of the type, and if that is the case can wool producers justify the additional cost of two shearings in one year?

To get to the bottom of this issue, a full understanding of the situation is needed. It is normal for suppliers (wool growers) to want to meet customer requirements (processors). At the same time, meeting the “new” requirement cannot increase the net costs to the business unless there is an off-setting increase in income.

South Australia is the only major crop producing area in Australia which does not allow the commercial production of GM crops. We were tasked by the industry with answering the question:

”Does the GM moratorium, provide a premium price to South Australian farmers?”

The latest biosecurity failure in South Africa (SA), the detection of Foot and Mouth Disease (FMD), not only had immediate impacts, with the banning of all movements of cloven foot animals and their products; but also consequential impacts on other SA farm products.

• “I won’t use swaps because if the market goes up I will lose”
  

• “I have heard of a wheat farmer who lost his farm as a result of taking a Grain Swap”

• “The bank always wins; they know more about the market than we do”

• “With swaps, someone always wins and someone always loses”

Sound familiar?

These are just some of the statements we have heard from farmers when the issue of swaps is raised.

“Canberra bubble” has been coined the word of the year by the Australian National Dictionary Centre. Mecardo suggests that the equivalent in 2018 for agriculture is “Social Licence”.

Both are somewhat vague in meaning, although they are regularly trotted out by commentators and the plethora of industry opinionated columnists. We have noticed that “social licence” is now pushed to farmers and other agriculture industry participants as something to be “earned”.

In recent weeks Lempriere Grain went into administration, taking with it debts of A$18.8m. This is not the first grain company to fold and will not be the last.

We felt like it was an opportune time to revisit counterparty risk in light of recent industry rumours of a number of grain traders at risk.

Is counterparty risk a major issue, and how can you protect against it?

There’s no question that the live sheep export trade is an important market for many Australian sheep producers, but it also supports a raft of other businesses along the supply chain. Help us to determine the value of the live sheep trade to regional Australia and participants in the supply chain by completing these short surveys.

Greasy wool prices have weakened in the past couple of months, from high levels, so the natural question is “What is going on?”. This article is an assessment of the background to the current wool market to help understand where prices are likely to go.

Drought, destocking, and strong overseas cattle prices. The current picture of the cattle market isn't unfamiliar, with many factors on the surface looking remarkably similar to the period just before the breaking of the 2014 drought. So can we expect a repeat of the historic rally?