(Bloomberg) -- A deadly deluge of rain over eastern Australia is the latest challenge for agricultural supplies in the country as severe flooding pummels beef producers and upends critical transport routes in affected regions -- leaving cows stranded in strange places, or even dead on a beach.
Farmers in Queensland and northern New South Wales have rushed to relocate their herds to higher ground as rain that began falling in biblical proportions last weekend threatens loss of livestock, while the floods have forced temporary closures of major meat abattoirs, including JBS SA's flagship Dinmore plant, which exports to over 50 countries. The plant is set to restart Wednesday, a spokesperson for company said.
Already hamstrung by labor shortages and shrinking margins on account of soaring cattle prices and high input costs, processors are set to experience the brunt of the weather-related havoc as damaged roads remain shut, leaving staff stranded at home, according to Matt Dalgleish, manager of commodity market insights at Thomas Elder Markets. That's on top of two years of pandemic disruptions that stalled operations across the country for months as waves of Covid incapacitated swathes of the available workforce.
“Shutdowns and stoppages will always have an impact on margins, we've got to continue to keep ourselves in these markets,” said Patrick Hutchinson, chief executive officer for the Australian Meat Industry Council. “All these small things remove that margin and at the moment, I would ascertain that we are probably still running at about A$200 ($145) a body in the red.”
Still, abattoirs' operations remained more or less resilient throughout the pandemic, according to Hutchinson, who added that he expected that the sector could withstand the current disruptions provided infrastructure has not been badly impaired. Damage assessments are ongoing, he said.
While the weather event could be sufficient proof for companies to declare a force majeure on delivery contracts, Dalgleish said that would only start to become a more likely scenario if the poor conditions extended for longer than anticipated and closures were protracted for weeks.
Farmers Can Only Watch as Australian Cattle Perish in Floods
Widespread cattle losses are unlikely to occur on the scale seen in previous years -- when rains killed about 600,000 Queensland cows in 2019 -- as the affected areas this time had the advantage of being more elevated and accounted for just 1.5% of the entire Queensland herd. The disruptions, while significant for regional communities, are unlikely to have a huge flow-on effect for pricing and would be short-term rather than long-term, Dalgleish added.
Sorghum crops about to be harvested in southeast Queensland were also damaged and would likely lead to a reduction in quality and significant loss of value, according to Michael Guerin, chief executive officer of farmer industry group AgForce Queensland. Wheat and barley plantings in the Darling Downs area, which can run a two-crop program per year, were also hurt.
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