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Welcome to Humans of Agriculture. This podcast series is dedicated to discovering more about our food system, from the people involved in it.
Along the journey we'll be meeting people from all walks of life from Australia and from afar. Join us as we find out how our communities and our culture shape what we eat, and ultimately who we are.
More people, More often, Identifying with Agriculture
Oli Le Lievre 0:02
G'day and welcome to the internet on the go podcast produced by humans of agriculture. Our podcast is designed to get you across the things that matter in Ozzie agribusiness in a way that's just well, bloody easy to understand. Think of me as a friend that is learning with you, as we discover and chat about the topics, from farm to fork, and even beyond. Let's jump into it. Welcome back to another quarterly update. It's insane. The third quarter of 2023 is already beyond us, Colin, we've got you back in the car actually reckon it'd be interesting looking at where we where we chatted to 12 months ago. And then just how these quarters and how it's actually evolved over the year, and we chat about land, and what's happening in the rural real estate game. But there's just so many factors at play. So I think it'd be interesting today to chat to you a little bit about what's happening in the market, how El Nino is impacting how livestock prices, if it is impacting that, and then interest rates. So it's kind of like just this constant flow of different factors at the moment, isn't it?
Speaker 2 1:03
You know, with the land market is a result of lots of issues and sediment volume was certainly starting to see that certainly change from where we were in October in 2022. So a number of issues in other markets have changed significantly. Interest rates, livestock prices, probably predominantly the Bureau's forecasts of imminent doom is also having an impact in so the labor market is not immune to those factors. Because it's largely driven by sentiment.
Oli Le Lievre 1:29
You'd mentioned just off here, but I think it's worth mentioning on here. Last time, you said you don't feel like you'd ever been busier in your career. And you've beaten that again, this quarter.
Speaker 2 1:39
A little bit record around the broken boy this morning. It's early, but night, look, it's springtime, we really busy through spring, if we're not busy, now we're in trouble. So we're not complaining about that. But we've got a lot of good assets in the market at the moment. And they creating a lot of interest, despite some headwinds.
Oli Le Lievre 1:55
And so just in the last few weeks, the Bureau has declared that an El Nino is in fact actually happening. So how do you see this impacting the market immediately, but then also, is there lessons that we can look at from historical loneliness, and what that actually does able to,
Speaker 2 2:11
unfortunately, a situation of haves and have nots, obviously, North Adobo in New South Wales, the seasonal conditions are quite dire. And we feel sorry for those producers who are looking to heaven for salvation in rain, once you've moved further south in Susan ditches is still pretty good southwest slope, Southern Tablelands, and down through into the river and Victoria, is still very well set up. And when imminent rain, hopefully falling today, could really lock a spring in and for a lot of those areas. You know, as a drought, we'll start with a failed spring, if we can drag this rain forecast anywhere from 25 to sort of 35 millimeters, then, you know, a lot of these districts again, lock in the spring. And so therefore, if it turns dry over summer, probably not necessarily the end of the world, obviously, then we start sweating on an order break, you know, that obviously becomes the next factor and next rain event becomes very, obviously acutely important to everyone. Obviously, northern New South Wales, we're in no more summer rainfall pattern, yet they're coming into the rainfall period. So whether it'll Nino impacts that summer rainfall pattern will obviously that'll be yet to be borne out. You know, there has been an element I use where rainfall hasn't been, you know, as negative as, as others. So it can be a bit variable. But obviously, the Bureau has been very strong in their advice to everyone that this one could be quite acute.
Oli Le Lievre 3:31
Can you compare, like events to other ones I did? Does the market and especially in the land space, does it react similarly, when these type of events and these drying periods happen? Because I think one thing I found really interesting in was through 2018 2019. My observations were that, like the market, although we were experiencing some of the worst droughts, we never had that land process kind of kept going. Yeah, and
Speaker 2 3:55
I suppose legally, we were mentioned maybe in one of my previous discussions view that I look back in, you know, 2021 2223, where the markets just accelerated rates I've never seen before. And I thought to myself, well, you know, what did I miss why? Why didn't I suppose least some sort of expert in rural property, look back and didn't pick up the signals of why that had occurred? What was building it for that to occur? If anyone thought they could predicted? Well, I think they're either lawyer or lucky. But when I look back, I actually think that you're dead, right? In 2008 and 2008, when we were in really dire straits and most of the East Coast. In regard to seasonal conditions. The land market was quite strong and was rising year on year. And so we're supposedly in a position where we've got negative impacts on cash flows, yet farmers were investing and that I think there was one a couple of issues that were different to what we're looking at now. One is interest rates back in October 18. The hash rate was at 1.5% and in October ordering the cash rate was point seven 5%. So today it's 4.1. It was remained unchanged yesterday. So the new reserve bank governor didn't have to do anything. So anyway, that's so it's a 4.1. So that yeah, it's basically four times over four times what was the interest rates are then in October on eight. So that was obviously having a significant impact. I think also, Livestock prices were really strong in droughts, loss of prices normally collapse under the impact of numbers. But in 19, certainly in the sheet game, it was really strong. So you she's gonna see now it's gonna be interesting to see what happens because we've got higher interest rates are significantly higher, probably still only neutral levels when you look at history, but we've had strongest falls in livestock prices, then I can recall. Certainly, I think that's going to have a big impact, because what it does it impact serviceability, and obviously the ability ability for buyers to borrow money to fund expansion, there's two things that the bank is going to look at, first of all, is equity. That In other words, that all goes pear shaped in the can they retract their position. And secondly, what is the chance of the borrower repaying paying the interest? So it's the serviceability side of things that I think is certainly coming under pressure, we are seeing land values, I think the market blood all market sentiments, like they overshoot one way or the other. And I think we can probably say that the livestock, the land markets overshot, they're probably rolling over the top. Now we're trying to work out where that base is going to be, I think it's already probably seeing that at least a five or 10% off where it really peaked. But we're still in deals now, at those sort of levels. It's remarkable that we're not remarkable, I think it's quite mature that a lot of indoors, probably understand that the market, you know, got to be Topsy, but still to be selling at a five or 10% level, underwear top down, it is still a very, very strong land value position.
Oli Le Lievre 7:01
Is there one factor that really puts more pressure on it than others? Or is it compounding pace of interest rates in terms of what's actually out? And then as you're saying there with livestock processes and commodity prices, actually, in terms of people's serviceability is there one that kind of has a larger influence than another
Speaker 2 7:17
not only so I think it all meshes into one, it all meshes into sentiment. And people do act. And of course, when markets don't like uncertainty, so the man, we've got a lot of uncertainty. I think the interest rate story is probably coming a little bit clearer, I think most people understand that if there's a lift or two, that might be it. And there's a lot of forecasters talking about it maybe coming off. So I think we're I think the interest rate story is probably coming a little bit clearer. Obviously, the seasonal conditions are ever evolving. And you know, you want a good fall away from breaking a dry period. So that can happen. So you know, that's obviously that's always there. But we've had a significant wet period, and averages tell you that we'll probably roll into a bit of a dry period. Now, whether that's a drought, or a dry period, that's obviously yet to be yet to come to fruition, especially in southern southeastern Australia, they still could roll on quite nicely. But the livestock pricing piece is really uncertain. You know, now that we've been selling lambs in the north of 650 $7, a kilo dressed and now we're down sub five, and particularly mountain where I've just locked in my old mountain indigo, and it's gonna go at $1.20 to $1.40. So that's dress way. So that's changes the dynamics and the profitability of your business quite significantly. And so you can fully understand that the people are probably taking a breath and thinking, Well, what's my next move? It's interesting now, only that what I'm finding is that the inquiry levels for property is still reasonably strong. And I'm actually finding that the the quality of the inquiry is probably significantly better. In other words, the parties who are still in the market who can understand these factors and are still willing to participate?
Oli Le Lievre 9:00
Do you think like, part of that is that and it seems so cliche to say that, like, there's not more ag land getting created, but like people understand kind of what happened and the competitiveness that was in the market, and so actually going well, if there's the opportunity to go or look to expand, it's still going to be the priority looking at him. Long term kind of multi decade generational view.
Speaker 2 9:24
But I scratch my head at times when people you know, you've got to be able to service your debt. So again, we'd be wrong in their acute issues in acute issues, such as Susan price, interest rates, you know, don't get me wrong, then. I'm not underplaying their importance. But the the same reason that if you did your budgets in the top 90 In the ninth this off commodity prices and interest rates at the 10th decile, and you thought, well, that's gonna carry on forever, then, you know, it's probably a bit of a foolhardy way to look at it. I think that the more astute investors and buyers who are looking for expansion opportunities are obviously looking at long term commodity prices, long term interest rates and where they can withstand, and obviously their the resilience of their business to be able to withstand seasonal depression. Yeah.
Oli Le Lievre 10:07
So one of the other areas of the market, which has started to get a little bit of conversation happening about it, which I know we've chatted, and is the International and I guess, yeah, the the larger corporate investors. That was earlier this week that a couple of different reports are saying that the total number of hectares that is owned by international businesses and people has actually decreased and is the last in seven years as of June 2022. So has that continued that kind of pullback in terms of hectares? And how much of a factor is that?
Speaker 2 10:39
I think you've got to really look into the numbers and understand what they're saying. It's the total hectares has gone India, I certainly don't get a return value. And that's obviously because there's been some large pastoral holdings change change, which is impacted those numbers, we're still seeing really strong inquiry from foreign capital. And that foreign capital is generally managed by local Australians who are deploying that into Australian ag and they're still strongly looking at opportunities, particularly in the development space, you know, they're looking for you're creating value for their investors. So, you know, buying, whether it's a change of use of land and development of cropping grows into cropping, irrigate Brawley into irrigated, irrigated row crop into permanent plantings that those step up in values are the opportunities that generally a lot of these guys are looking at, especially if you look at Dairy, for example, you know, really strong profitability results coming out of the dairy sector. And there's certainly a lot of foreign investment in interests in that area, as well.
Oli Le Lievre 11:41
And so you just mentioned dairy, is that probably the main type of enterprise? or is there other land types as well that are starting
Speaker 2 11:49
deer is one of those areas, although it's obviously a very mature industry, it has a different cashflow profile, but a lot of other businesses, which is obviously important, you look at chickens and poultry, that's obviously been a hotspot in recent times, as well as some significant investments in those areas and transactions occurring. And then if you look at the broad, okay, look, the broader, accurate, broad effect here, I should say, row cropping has always been a popular space to foreign capital. And so you know that the whole story of food security is not going away anytime soon. I think the other thing that we've mentioned previously is that also some of the parties who have only got a mandate for four row crops or without what I've now got a mandate for, like, including livestock, and a lot of that to come through and the fact that they see livestock is important part of maybe the carbon story, in regard to resting land and permanent pastures and things like that with regard to rotations. And although we've obviously got the methane issue that livestock need to have got to overcome in regard to their carbon footprint, it seems that investors have seen livestock as an important part of the mix now, which is interesting, because suddenly, that wasn't the case two years ago.
Oli Le Lievre 12:59
Yeah. Now it's interesting, I remember you send out a few months ago, the other one, which we just haven't touched on, we can touch on quickly, Western Australia, it's an easy part of Australia. But to be careful what we say, to forget about anything of note happening over that.
Speaker 2 13:13
It's funny, it's like they lag a little bit behind their trends or find and over, you know, it is quite an independent market in a way, but it does sort of, you know, Australia is still one country and the trends roll across the country, albeit in different sectors and different influences. But certainly the climatic position can be quite different for the East Coast. And that obviously means it can get out of cycle a bit. But certainly the the market out there is really strong, and certainly strong appetite for assets. And it's still, I think, relatively good value compared to the East Coast.
Oli Le Lievre 13:47
And so one other question and most, Your Honor, you've been flat out on the road, but we've had the chance to chat with a few different people from the time we've spoken with Jess, obviously, Queensland, Josh and wi, Nick Turnbull has a character and then live running things off in the north and do we did a podcast with live but then a few other items, anything that you've learned, or noticed about these staff members,
Speaker 2 14:11
that really surprised me, and particularly, what didn't surprise me is their passion for agriculture. They're all quality people. We're so lucky to have these guys in our business. They bring a lot of laughter probably most important agree, but they're hard working. They're knowledgeable, and they're so keen to improve. And they really love AG. They're just the type of people that we wanted in our business. And we'd better for having,
Oli Le Lievre 14:35
yeah, not totally, or I can, there's a bit of a formula and a special ingredient there. And they all seem like just an absolute great bunch of people. And it seems to be the consistent thing that we're saying. So it's been a whole lot of fun chatting with them.
Speaker 2 14:50
And I really enjoyed reading and hearing their stories in. And I think it's interesting that you don't have to be lifelong to be in agriculture. And you're an example of that, you know, All love agriculture, you know, people can grow up in metropolitan areas. But the issue is that once it gets in your blood, it's hard to get out. And so then what happened a bit later in life for some, or it might have been a birth for others, though, but that doesn't mean it's any less. And so like I said, once it gets in your blood, it's added removed.
Oli Le Lievre 15:18
Now you're dead right there. Now. Thank you, Carl. I know we love getting the feedback and people find these little quarterly updates that we're doing really useful. So thank you for joining us again, and enjoy your time on the road. Stay safe out there. And hopefully, you've got the windscreen wipers on today.
Unknown Speaker 15:33
Yeah, that's the plan. Anything.
Oli Le Lievre 15:37
Well, that's it for another episode from us here at humans of agriculture. We hope you're enjoying these podcasts. And well, if you're not, let us know. Hit us up at Hello at humans of agriculture.com. Get in touch with any guest recommendations topics, or things you'd like us to talk and get curious about. If you enjoyed this episode, please share it with a friend. Right subscribe, review it, any feedback is absolutely awesome. And we really do welcome it. So look after yourselves. Stay safe, stay sane. We'll see you next time.
Transcribed by https://otter.ai