Lower prices buoy Wellard's cattle outlook

Lower prices buoy Wellard's cattle outlook

Wed, 07/02/2018 - 14:47
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Wellard Ship

Wellard has forecast increased demand for cattle in China on the back of lower prices. Photo: Wellard

Agricultural export group Wellard has flagged the emergence of more opportunities to ship cattle to China, on the back of lower prices for heavy cattle.

Wellard, which today announced a net loss of $7.5 million on the back of $163.7 million in revenue for the six months to December 31, completed its first shipment of beef steers for processing in China in November.

The company said it had negotiated a new supply agreement in the December quarter to ship 10,000 breeding cattle to China before the end of the financial year.

Wellard said a downward trend in the price of heavy cattle was the impetus for increased inquiry for further shipments.

“The eastern young cattle indicator for January 2018 is about 15 per cent lower than the corresponding period last year,” Wellard executive director of operations Fred Troncone said.

“This improvement has opened opportunities for small shipments of heavy cattle to China, which we expect will gradually increase as quarantine and processing infrastructure in coastal China develops, and assuming that Australian livestock prices remain attractive.”

Wellard’s $7.5 million net loss was a significant improvement on its $17.9 million net loss in the previous corresponding period, but Mr Troncone said significant challenges remained in the market.

Mr Troncone said a sustained effort would be required to claw back market share and increase profitability in Wellard’s core markets.

“Demand for live cattle from countries in the Mediterranean, including Turkey, continues to be strong and we expect that a significant proportion of these will continue to be sourced from South America,” Mr Troncone said.

“We are seeing more shipping capacity being diverted into servicing these markets which creates greater competition, but we are receiving a good level of inquiry for our high-quality vessels which importers recognise produce improved animal welfare and commercial outcomes.

Mr Troncone said inquiries for live sheep shipments to the Middle East were also increasing.

Agricultural export group Wellard has flagged the emergence of more opportunities to ship cattle to China, on the back of lower prices for heavy cattle.

Wellard, which today announced a net loss of $7.5 million on the back of $163.7 million in revenue for the six months to December 31, completed its first shipment of beef steers for processing in China in November.

The company said it had negotiated a new supply agreement in the December quarter to ship 10,000 breeding cattle to China before the end of the financial year.

Wellard said a downward trend in the price of heavy cattle was the impetus for increased inquiry for further shipments.

“The eastern young cattle indicator for January 2018 is about 15 per cent lower than the corresponding period last year,” Wellard executive director of operations Fred Troncone said.

“This improvement has opened opportunities for small shipments of heavy cattle to China, which we expect will gradually increase as quarantine and processing infrastructure in coastal China develops, and assuming that Australian livestock prices remain attractive.”

Wellard’s $7.5 million net loss was a significant improvement on its $17.9 million net loss in the previous corresponding period, but Mr Troncone said significant challenges remained in the market.

Mr Troncone said a sustained effort would be required to claw back market share and increase profitability in Wellard’s core markets.

“Demand for live cattle from countries in the Mediterranean, including Turkey, continues to be strong and we expect that a significant proportion of these will continue to be sourced from South America,” Mr Troncone said.

“We are seeing more shipping capacity being diverted into servicing these markets which creates greater competition, but we are receiving a good level of inquiry for our high-quality vessels which importers recognise produce improved animal welfare and commercial outcomes.

Mr Troncone said inquiries for live sheep shipments to the Middle East were also increasing.