Cattle, grazing land in big demand from overseas

By ERWIN CHLANDA
 
We don’t have enough cattle nor enough land on which they graze: There is a huge demand for both, from countries with markets many time the size of Australia’s.
 
David Williams says buyers with immensely deep pockets are buying up cattle station real estate in the Top End of Australia, or the cattle it produces.
 
Mr Williams is the managing director of the investment bank Kidder Williams Ltd and was a speaker at Friday’s annual meeting of the Cattlemen’s Association.
 
In an interview with the Alice Springs News Online he said the land purchases are “largely driven by the Chinese, the Indonesians, a bit by the United Arab Emirates, and a bit by the UK.”
 
Indonesians buyers of Top End land want to secure live animal supply, “making sure that the feed lots and abattoirs in Indonesia are kept fully stocked”.
 
“We see a lot of Chinese money coming into the region. That trade is a mixed bag.
 
“Some people are property developers who have distribution sources in China that Australians don’t have,” Mr Williams said.
 
“There is very little property acquisition that I can see where Australians are trying to arbitrage and onsell to the Chinese. They go direct, and frankly a lot goes at prices that Australians can’t stomach.
 
“The reason for that is that Chinese are coming largely with a lower cost of capital and many are coming with their existing markets, as are the Indonesians.
 
“If you are an Australian buyer you come with a higher cost of capital and you probably can’t see past the blinkered view about what you are going to do with those animals and meat going into the Australian market – maybe a little bit of export.
 
“But it’s different for somebody, for example, from China who think they can sell the product into Alibaba or JD.com, the big online distributors in China. Alibaba has 420 million customers.
 
“If a Chinaman is optimistic he can get this kind of source for any product, then he’s going to pay a hell of a lot bigger price than any Australian can afford to pay for a property here.”
 
Will they have enough cattle? The carrying capacity of Territory pastoral land can be as low as two head per square kilometer.
 
“There is a problem with capacity because of the drought, not so much because of the region,” Mr Williams (at left) said.
 
“We’ve had a bit of rain, so that’s going to be good. People are a bit buoyed by that, and I think we’ll start to see a little bit of re-stocking.
 
“I’ve seen a few animals coming from down south, but it’s a two-year process, and in those two years, even if we get good rains, the prices are going to stay high.”
 
There is demand not just from countries including Vietnam and Israel, but also the “box market” in the USA, meat processed here and sent to the US for hamburger meat.
 
“That market has been incredibly strong last year and will probably stay incredibly strong for at least another year, maybe two, because the US herd is down. They need our meat for blending for hamburgers.”
 
Woolworths and Coles are short of meat.
 
The processors in Australia are bleeding: The cattle shortage means they can’t fill up the killing chains: “These are big fixed-cost machines.
 
“If you have a capacity of 1000 head and you’re only doing 300, you’re tearing up dollar bills at the moment. You want to keep your workers on because you’re going to need them when the supply turns.”
 
The Australian herd is down and still a part of it is going into the overseas live market, or the box market in the US.
 
The Indonesians are taking light animals which don’t need to be fattened up prior to sale, 350kg instead of 600kg a head, and “they are paying big prices”, Mr Williams said.
 
Growers are thinking of sending live animals to the USA, to supplement their herd: “If that happens the prices [already over $3 a kilo] will go up another 30% to 40%.”