Behind the Beef –Market Movements with Jono Spence

Cheyne Twist, Senior Marketing and Communications Officer

In this episode of Behind the Beef, we were joined by Jono Spence, Director of livestock agency Spence Dix & Co. Located in the Keith region of South Australia, Jonathan, better known as Jono, is a well-regarded cattleman in the beef business. Jono has a background working in many facets of both stud and commercial sectors of the beef industry, coordinating the cattle side of the Spence Dix & Co business.

Jono is also a recognised and experienced auctioneer. In his time away from the business he enjoys showing steers with his family, where they have been awarded champion success at the Royal Shows.

Jono joined the podcast to talk market movements. At the time the episode was recorded we were only a couple of months into 2023, showing a continued promise in the market, with sale prices, averages and clearances for the most part still very solid.

Coming from the year that was 2022 in all its highs, we were interested in the opinion of someone with boots on the ground regarding what he has observed of the market in his region as well as around the country, what trends have been noted, the final markets for seedstock and commercial animals being sold out of South Australia and the all-important crystal ball predictions.

A very big thanks to Jono for joining us for this podcast episode.

Thanks very much for joining us for the podcast today. For our listeners, what's your story, who are you and what is your role in the Ag industry?

My name is Jonathan Spence. Since a young age, many people have called me Jono. I'm a livestock agent and partner in Spence Dix & Co and I'm situated in the southeast of South Australia (SA). Our company has agents right throughout SA, but our home base is Keith in the upper southeast.

I've been a livestock agent for 20 years now and prior to that I worked through the livestock industry through a normal progression, I suppose, through jackarooing, a stint at ag college and a bit of a stint overseas in North America working in cattle. I've been very fortunate to be in this wonderful industry as an agent and probably more fortunate to be a partner in our own business for the last 14 years.

We’re going to talk about the market movements that you've seen for the beginning of 2023 and what you think might happen if you had a crystal ball, I guess you could say, for the rest of 2023. To start off, there have been some great results for seed stock and commercial Angus cattle around the country so far this year and South Australia has recently seen weaner sales and a run of Autumn bull sales in the region. What trends have you seen amongst the weaner sales for Angus and Angus influenced commercial animals?

I suppose firstly, we've had huge success the last couple of years in our weaner sales right across the board, no matter what the breed. This year we probably saw a little bit more of a traditional trend as we work through the summer markets east, which hasn't been the case over the last few years, and we probably saw our markets come back by potentially up to 30% on the previous year. As far as Angus cattle goes, there has been tremendous demand and I guess as the breed has progressed, they suit more and more markets.

If you look at the heifer side it’s been very strong for people replenishing breeder stocks across the board, as they are the preferred breed for people to use as replacement breeders. Weaner heifers have been some of the dearest sales on individual pens.

With steer weaners the breed is so dominant and there's so many of them, but they do suit such a range of markets. We see anyone from backgrounders for the long fed markets and domestic feeders but also a lot of bullock fatteners that are growing out heavier cattle are preferring that black hide and carcase quality of the Angus, so a lot of those guys were replacing their bullocks with Angus weaner steers.

In terms of people making that change to Angus animals, is that something that you've seen progressing over quite an extended period of time or is it in the last couple of years that you've really seen that shift?

If I look at regions like the region that we live in and you go back 25 or 30 years, there was a lot of red and white cattle, a lot of Shorthorn cattle and a lot of British European cross cow bases too. Certainly, there is a really high population of Angus herds now through our region and I think its like that for a number of regions.

On the other side of things, what trends have you observed during the Angus seedstock sales in 2023? Have you seen a similar tracking to the way the market moves in the commercial sector?

We have in places, but it's been a bit of a strange one really. We've had one or two producers have sales almost identical to last year in the sales that we conduct, we've had one or two possibly 30% back, maybe in line with the cattle market. We've actually had one in particular that was a little bit better, maybe 10%, 15% better than last year.

Clearances were still very solid. I think it's been one great thing that producers have done. When their pockets have been filled with these higher cattle prices in general, they have put it back into their breeding stock and into their genetics, which has been great to see. I think it's seen plenty of producers go and attend these sales and say, no, that's the one I want, and I'm going to buy it.

When you were looking towards the year on January 1, or off of the back of 2022 comparatively, did you think this would be the results that you would see? Did you think that the market would come back? I guess when you've reached such an extreme, there's got to be some come down, but did you anticipate the shift in results?

I think that's about what we had said and thought in line with the cattle market moving and like I said, some of those bull sales in particular were better. I just have to say in relation to our commercial female sales, they actually held up considerably.

Considering the cattle market, they really defied that trend for a lot of people buying pregnant Angus females.

We conduct an Angus feature Female Sale in December at Naracoorte and that is all pregnancy tested females, some 1,200, and that market for the most part really defied that trend.

The cattle market for this year is in a real regroup. The facts are we've had the dearest cattle in the world in Australia for the last couple of years, and our competitors have been able to produce and sell it cheaper on the world market. Our customers have got a lot of full chillers and warehousing space overseas. A great effect of that has been from the drought in the US and in turn that a lot of cattle are being processed, so we've just seen this cheque which has really come through the meat market, and our processors and feedlots have got a lot of dear cattle on feed and so it really was the correction that had to happen.

For 2023, I guess the market will be in a little bit of a reset and we might see, listening to a lot of the processors and forecasters that we speak to, a little bit more of a traditional pattern where over these brown months in the southern regions, over summer and autumn where we see a cheaper trend and as supply tightens up, hopefully a good break of the season comes and the market trends dearer through that winter and early spring and then perhaps more traditional patterns through later in the spring and the summer. Is there a dominant end market for commercial Angus and Angus influenced cattle selling in South Australia? And what kind of operations are you seeing them going into?

That’s the strength of the breed at the moment - we're seeing them go into all markets.

I think that the breed has really concentrated hard on that early growth and they're not just a calving ease alternative now, so they suit that weaner market, but they also suit backgrounders to feeders. I guess that's one of the traditional markets for the Angus breed, the 200 - 250-day grain fed market, but with the numbers about, they're able to supply our domestic feeders which is feeding for the shorter fed products for our domestic supermarkets, where it might be more a 70 day to 90-day product.

Like I said, for the grass fatteners and the bullock breeders, there's certainly been an appetite from the processors to process these Angus cattle and a lot of that is due to their consistency in their carcase merit as cattle that are able to fatten easily off grass, but also with some degree of marbling and carcase quality, which has really suited the MSA program.

On the other side of the coin for the seedstock sales, what kind of operations are you seeing those bulls heading into?

In our area most of the clients are weaner breeders or breeding backgrounders, so they're going into self-replacing herds for the most part, and then those people would be backgrounding those cattle, some to grass fattening and perhaps for a supermarket however most are off to a feedlot.

That's probably the good thing about the breed, that there is a good each way bet there that if you're not quite going to finish your animal, nearly every feedlot in Australia will pay you well for that well weaned and healthy Angus steer.

We have seen that herds have been rebuilding and the breed is obviously very popular for calving ease, and we've seen a great premium for the last two or three years for those calving ease, low birth weight heifer bulls, to go out and join heifers.

Considering Angus cattle are regarded as a temperate breed, are you aware of any levels of utilisation of Angus genetics coming from South Australia into the northernmost areas of Australia?

There is no doubt that they are certainly far more popular or considered than they were going back in generations, where other British breeds coming from South Australia going into the north may have been more popular. No doubt in parts of western Queensland, parts of northern South Australia, and parts of the Territory where we wouldn't have thought we'd see Angus cattle, they're now venturing into those areas.

From your agent’s perspective, what are the key drivers of commercial success for Angus and Angus influenced cattle? Essentially, why Angus?

C: The PPHS & Spence Dix & Co feature female sale in December saw PTIC Angus females in strong demand. P&K Bryson, Keppoch SA, offered 52 PTIC Angus mixed age cows selling to a top of $3280 and averaging $ 3199. Angus Australia Extension Manager, Jake Phillips, presented Paul and Will Bryson, with Best Presented pen. Image: Stock Journal D: Nathan, Anthony & Alex McCarthy, McCarthy Livestock, with Mandy, Zoe & Damian Gommers, Mandayen, Spence Dix and Co director Jono Spence and Elders Victoria Stud Stock manager Ross Milne at the 2022 Mandayen Bull Sale. Image: Stock Journal

I think it's probably just that market suitability and the reasons behind that have been feed conversion, carcase quality, health and I put a lot of that down to the fact that this is a breed that was one of the earliest in this country to begin performance recording.

There's plenty of other breeds that poopooed performance recording for a little while and then they got on that track. I think that by the time that some of those other breeds got on board, the accuracy of some of that data being collected by the Angus breeders, who had done a marvellous job, meant they were a fair way ahead. That market suitability, as far as agents go, we love selling all cattle, but it's nice when they're easy to sell.

Considering your clients experiences selling Angus and Angus influenced cattle, are there negative connotations for those utilising or looking to utilise Angus genetics in certain areas of Australia? Do you get any pushback or any considerations for people when they're investigating using Angus genetics?

I think plenty of breeds love to fly their flag and barrack for their breed, like a football team, but you've got to be honest about all of the breeds.

The Angus breed is fantastic, but none of them are a ten out of ten. In our country, where we are on the limestone coast and in this upper southeast, we deal with a lot of sandy loam and sandy sort of ground and while I've commended the breed and the breeders for their performance recording as that's probably one of those great things that put the breed ahead, at the same time, working too far on that or on single trait selection means we've got to be aware of phenotype and the structure on the cattle.

Angus is a breed that is consistently challenged with their feet and their structure. On a lot of people's country and in a lot of parts of Australia, that doesn't really matter, but on our lighter country we really need to be sure that we're selecting cattle with good depth of heel and good hoof shape, otherwise we really don't get that longevity and stability out of our bulls and into our cowherds and replacement females.

One of the things that they're probably challenged by going into some of those northern regions and something that some breeds have had to work on really hard, whilst other breeds have possibly been able to take for granted a bit, is temperament.

We've really got to be aware of temperament and it's been very easy, if you're a breeder of black bulls, to put a very high majority of them all in the sale pen for the last few years because they've been very easy to sell. However, a real driver is the trade of temperament on economy, on fertility and certainly on carcase quality.

Temperament is something that people are certainly always mindful of, particularly when selecting them, even more so for bigger pastoral operations.

We did a survey a couple of years ago where we surveyed not just Angus producers, but producers all around Australia, and temperament was right up there in terms of what people are looking for in their cattle, so that's definitely something that we are aware of. There have obviously been a number of higher averages and clearance rates in the past couple of years achieved for Angus seedstock producers in both bull and female sales, with many sourced for commercial operations. What do you think these prices indicate regarding commercial investment into genetic gain?

I don't know how well I can answer that question to be honest with you, but I think that there's certainly been the perfect storm for a lot of seedstock producers in Australia, and particularly in the Angus breed. But we've had this hit of COVID-19 as well as some of our dearest prices of cattle, and during this COVID period building materials and supplies and particularly steel labour forces, have been pretty difficult.

What does the farmer naturally want to do when he's earning a big quid? Minimise his tax and reinvest some money into the farm, reduce debt and build more improvements. Well, he hasn't been able to do all of those. He's been able to reduce debt, sure, but he hasn't been able to do everything else that easily. So, the logical thing is to reinvest in their cowherds and in their genetics, so it has been the perfect storm for seedstock producers and they've been well rewarded.

That has probably gone hand in hand with the old calculator that people used to use of the value of my old bull and five weaners, to now all of sudden the guy that used to have $6,000 for a bull has now got twelve or $14,000, and the guy that had ten has 15, and so on and so forth.

As for some of the sales in the east that we see, well, the sky seems to be the limit. They must have different sort of calculators on some of those places, and no doubt excellent cattle too, for sure.

To wrap up our interview, is there anything that you wanted to add from your perspective about the market movements?

I did hear one of Australia's more respected and certainly widely heard forecasters has said that we're in this hiatus for a little bit, but when we come out of it, be that in 2024 or 2025, the Eastern Young Cattle Indicator could be higher than we've previously seen it, into that $13 range.

Compared to the high 600 cents we are at right now as we speak, it'll be an interesting space to watch.

So, I guess the guys who have invested well in their Angus genetics and their cow herds will be paid well and well rewarded, one can hope.

We ask all of our guests this, how do you have your steak?

Medium rare, preferably with a touch of barbecue smoke in it.