March 29, 2011

 

Australian Agricultural Co. buys big cattle herd amid highest prices

 

 

Australian Agricultural Co., a major cattle producer in the world's second-biggest beef exporting nation, has bought one of the largest herds in the country when cattle prices are at record highs, he said Monday (Mar 28).

 

The price of cattle in Australia has further to go this year as do global beef prices, underpinned by favourable market fundamentals, he said.

 

"Not only is this herd bought well, but it's positioned well in terms of the market," being of mixed age, with cows, steers, heifers and bulls, and of the Bos Indicus or Brahmin breed, suitable for the extreme conditions in northern Australia, said David Farley, chief executive of Australian Agricultural Co.

 

Some of the new herd will be culled immediately for export to generate some quick cash flow, some younger cows will grow out on AAC stations, while some older cows will be positioned for slaughter when the company opens a new meatworks in Darwin next year, he said.

 

The vast beef cattle ranches spread across Northern Australia are called stations.

 

Earlier, AAC announced the purchase of 53,000 beasts for AUD26.1 million (US$26.78 million), or almost AUD500 (US$513) an animal, from the privately-owned Tipperary Group of Stations, which operates 180 kilometres south of Darwin city, the main exit point for live cattle exports, which go mostly to Indonesia.

 

AAC, which claims to be the oldest continuously operating company in Australia, having been established in 1824, owns 19 stations, two feedlots and three farms spread across more than 7.2 million hectares, or 1.1% of the continent's land mass.

 

The purchase from Tipperary increases AAC's herd by about 9% to more than 640,000 beasts, and while all the cattle aren't immediately marketable, their price per head is "commercially sensible" if not compelling given the current global price of beef and strengthening national cattle markets, Farley said.

 

Australia's Eastern Young Cattle Indicator settled US$0.0225 higher Monday at a record AUD4.2425 (US$4.35) a kilogramme of carcass weight, up almost 20% on year, after dipping to AUD3.85 (US$3.95) in January, according to analysts.

 

The index rose Monday after a 19% drop in young cattle supplies compared with last week. Queensland once again recorded widespread rain, causing further difficulties in transporting stock to saleyards in the state, which accounts for about half of national beef output.

 

"Strong buyer demand was received across all categories," it said.

 

Farley believes Australian cattle liveweight prices have another 10%-20% to rise this year.

 

International beef prices could rise up to 10% this year, given current prices relative to other sources of animal protein such as the meat of chicken, hogs or sheep, he said.

 

Australia exports almost two-thirds of its annual beef output, making it the second-largest beef exporter in the world. The trade was worth AUD4.1 billion (US$4.21 billion) to Australia in fiscal 2009-10, making it the nation's ninth most valuable merchandise export.

 

AAC concentrates its exports on the mature markets of Japan and South Korea, while "we're finding a good solid growth trend coming back into America," after exports slowed last year, he said.