"Cattle crash in anyone's language": Processor speaks truth to producers

"When young cattle that were selling for 700 cents kilogram six weeks ago are now making 500c/kg, a fall of 200c/kg, that's $600 less on a 300kg animal; that's a cattle crash in anyone's language," said Kyogle-based processor David Scarrabelotti, Greenmountain Trading. And he pointed out that these falls seen in recent weeks were purely on the back of producer loss of confidence in a market they had created.

Restockers who showed a disrespect for money when buying ridiculously expensive steers and heifers earlier in the year are "reaping their reward. They have only themselves to blame for buying cattle which if liquidated now would be a financial disaster, you can't have any sympathy for them."

The outspoken processor previously labelled producers "disrespectful of money" back in March 2021, when prices for store cattle far exceeded export expectations for boxed beef and he rued the lack of comprehension producers had in relation to the world market for meat, particularly when Australia can not consume what it produces.

"We have to export and we have to compete on the world stage, particularly against product from South America and India - the idea that we can demand more price because we have better quality and a greener environment only goes so far," he said.

"The domestic market has had significant negative impact. The first thing that comes off the menu when prices are too high is beef. The space allocated to beef in supermarkets has reduced substantially. The consumer has other options in relation to protein and is under cost pressure on all fronts in relation to living expenses, that's just a fact."

Now that the tables are turning Mr Scarrabelotti is eager to inform beef producers what he regards as the new reality in beef prices.

"What is coming now is reward for that disrespect for the value of money," he said. "They have to realise that cattle and beef are in a market that is subject to rise and fall. The bigger the boom, the bigger the bust."

He says 520 cents a kilogram is still too dear for yearling cattle.

"The producer is a slow learner," he said. "The price fall is going to continue. Processors can't just wind-up their capacity to kill. The logistics present a significant challenge."

Beyond immediate fears of foot and mouth disease, reduced restocker demand thanks to a cold, wet winter and bottlenecks at Abattoirs due to labour shortages Mr Scarrabelotti likes to remind producers that the national herd has rapidly rebounded in the good seasons and with the increase in supply comes a corresponding fall in demand.

"I predict that by Christmas there will be 30 million cattle in Australia," he said, pointing out that you only have to do the maths.

"By then we will have had three years of significantly reduced kills, excellent calving rates experienced during the rebound from drought and a high level of heifer retention on farm.

"The only thing in producers' favour in this cheaper market is that there is plenty of grass," he said. "And that the climate conditions are reasonably good."

However, he criticised producers attitudes to rising production input costs that have eroded earlier gains in vendor profits and questioned why the problem wasn't dealt with at the farm gate .Land has doubled in price due to low interest rates which is now changing and all other input costs have increased dramatically.

"They are really going to feel these cost increase pressures as returns for livestock drop," he said.

"No one resisted those price rises because they were making money too easily. In a business you have got to resist all price rises. When fertiliser had doubled why not stop buying it? When livestock are too expensive - stop buying them. It Is not a sin to look at pasture growing, but there is an old saying: That a farmer with grass is bad friends with money."

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