While recent rainfall had an immediate impact on the dry Australian landscape, one of the most significant jolts was felt by the hay market.
After months of tight supply of domestic fodder and fears of a national hay shortage, the rain caused a major softening of demand and prices. Prices vary from region to region, but Australian Fodder Industry Association chief executive John McKew said demand had almost entirely stalled along the east coast.
One of the crops most affected is pasture hay, which has dropped $215 a tonne to trade at between $250 and $300 for the Darling Downs in southern Queensland. "We are seeing good rains across the east coast, [so] you are seeing corresponding softening and a reduction in prices as a result of that," Mr McKew said. "Even if the rain has been isolated to particular regions ... we are seeing a flow-on effect into other regions."
A change was coming Mr McKew said producers should have been anticipating a change in the market. "Fodder prices [have been] at very high levels for an extended period of time ... there was always going to be a correction at some point, and that correction was always going to come about as a result of rain. "Common sense says that we've had a couple of years of very high prices across all fodder products; for sustainability, those prices were never going to be there â€” we haven't set a new floor price. "We're in a market that's very responsive to seasonal conditions and rain." Potential rainfall in the coming months would dictate which way prices turned, he added. "We're sitting on a knife edge in a fairly precarious situation; if the rains continue, then demand will continue to soften for fodder and prices will continue to ease. "However, if that relief is not widespread and not adequate, we will continue to see that need to buy fodder."
Looking further afield Lou Flohr, who farms in South Australia's Mallee region, started growing hay because of the frost risk to her grain crop. Now, she's grateful for the stability of export markets, rather than relying on volatile domestic demand. "We typically grow export hay, that's our largest market, and that is oaten hay, which goes into export markets in China, Japan, Taiwan and Korea," she said. "We prefer the export market in our business because it's a consistent market every year versus the domestic market, which can be hot and cold depending on how the seasons have gone across the country. "Generally, the export market does draw a premium and you do get paid more per tonne of product, so we will continue to chase the export market and opportunistically sell into the domestic market."
Hay export company Balco has sites in South Australia and Western Australia to send product into Asian markets. Chief executive Rob Lawson said the primary growing areas for oaten hay for export were WA's Wheatbelt, the Mid North and Mallee in South Australia, and central Victoria. "We've seen our supply base be constant through all of the different seasons," he said. "The biggest advantage is that an exporter will do a contract with a grower â€” we do contracts based on hectares â€” so the grower knows he has a place to be able to sell that product. "It gives them assurance that it doesn't matter what the domestic market is doing, they're going to have a willing buyer."
Unaffected by COVID-19 "Despite the drop in domestic demand and the coronavirus outbreak impacting markets worldwide, export demand remained strong," Mr Lawson said. He added that Balco was working with its shipping lines to ensure continued access into the markets. "One of the biggest pressures we face right now with the coronavirus is the risk of struggling to get some containers coming in to export back out with." "The ports in a lot of the Asian countries are remaining open to pass food through and, fortunately for us, animal food fits into that well."
© By Grace Whiteside, Thursday March 12, 2020 - 18:09 EDT
Footnote: Australian Hay exports. "Western Australia exports on average 48% of Australia's oaten hay, exporting around 300 000 tonnes worth over A$88 million in 2012/13. The WA hay industry is well established but still has potential to expand further to meet global demand." Oct 5, 2017