NSW drought subsidies blamed for soaring SA hay prices

Prices of grain and hay have risen sharply in recent months, and while this is good news for growers, it has priced many local livestock producers out of the market.

Livestock SA and SA Dairyfarmers’ Association chief executive Andrew Curtis said there was a “clear jump” in fodder prices following the introduction of a freight subsidy in NSW at the start of August.

On July 31, the NSW government announced it was allocating $190 million to those in drought-declared areas – some 99 per cent of the state – for drought transport subsidies to cover up to 50pc of the cost of transporting fodder, water or livestock to pasture, slaughter or sale, up to $20,000 a farm, backdated to January.

Qld has also offered freight subsidies of up to $20,000 to transport fodder.

“We acknowledge it is a competitive market but the issue is many SA areas are affected by low rainfall and are calling for fodder and it hasn’t been available because of interstate subsidies,” Mr Curtis said.

He said these subsidies had distorted the market, with most hay heading into northern NSW.

“In some cases it is cheaper for someone north of Dubbo, NSW, to truck hay (from SA growers) than it is for someone at Robertstown,” he said.

Mr Curtis said while these higher prices would impact all livestock industries, the sectors of most concern were dairy and pork.

“These are two industries where farmgate returns are depressed, therefore their ability to respond to higher feed prices is limited,” he said.

PorkSA chairman Mark McLean said grain prices, which already made up nearly 60pc of the cost of production, had lifted expenses at least 50 cents a kilogram from about $3/kg to $3.50/kg – well above the market price.

He believes the dry season and domestic demand from the east coast has been a big driver in this price jump.

“The grain market tells us there are reasonable stocks in the system but I believe subsidies for freight interstate are lifting the local price,” he said.

“It’s not all heading interstate but it is difficult to buy, since it’s so expensive.

“On the back of low pork prices, it’s a real double whammy. We’re in the third year of a cycle that is no different to being in drought.”

Even with recent small lifts in pork prices, he said the extreme rising costs are still enough to have many considering leaving the industry, with several producers of a significant scale looking to totally destock.

While other industries, such as dairy, have explored the option of a levy to combat rising feed prices, Mr McLean said more needs to be done to ensure consistency in returns.

“Levies are one thing, but I think it’s more about a fair price for a product,” he said.

Primary Industries Minister Tim Whetstone said many farming industries in SA had expressed their concerns about the interstate fodder and agistment transport subsidies.

“The transport subsidies are having a negative impact here in SA and are extending the financial impact of the drought to farmers in industries otherwise not drought-affected,” he said.

“Not only are our sheep and cattle farmers forced to buy feed in an artificially inflated fodder transport market, our dairy, pork and chicken farmers are being slugged with fodder shortages and high prices despite often not farming in drought-affected regions.

“The government is working with Livestock SA to establish a fodder register so farmers who cut an excess of hay this year can offer the feed to local South Australian farmers rather than see all our fodder shipped interstate.”  

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Livestock SA has been working with PIRSA to collate a fodder audit of how much feed is available and what will be harvested – on top of the traditional Crop and Pasture Report.

While it is expected that SA might produce more hay than in a usual season due to many cutting frost-affected crops, this may not be enough to counter the reduced output in NSW and Qld. 

Figures collated by Dairy Australia show hay prices in the South East and Central districts were lower at the start of 2018 against the same time last year and the five-year average.

Between July and August, hay prices in the central region jumped 112pc, from $165 a tonne to $350/t, and reached a peak of $450/t in mid-September.

This was $220/t more than the five-year average at the same time.

In the South East region, prices jumped from $250/t in July to $350/t in August – up 40pc. This was 63pc higher than the five-year average and 150pc up on 2017.

Feed barley prices have jumped from $310/t in July to $395/t in September.

But Balaklava hay grower Rob Saint does not believe the subsidies have played a significant role in increased demand for hay and grain in NSW and Qld.

He primarily exports hay interstate or to the international market and says he has seen an increase in domestic demand since 2016 when he began transporting hay to Blackall, Qld, and then into northern and central NSW.

He said the biggest spike in east coast demand was “panic buying” in March to May.

“People thought stocks were going to run out or hit $500/t,” he said.

He said since then demand had eased slightly, particularly with recent widespread rain in NSW.

“Things have slowed up a touch and are nothing like they were three or four months ago,” he said.