Demand for hay tends to peak during adverse weather conditions.
Melbourne, Australia (PRWEB) February 18, 2014
The Hay and Other Crop Growing industry has encountered difficult trading conditions over the past five years, and has exhibited large swings in revenue volatility. IBISWorld industry analyst Nick Flores states, “The majority of industry revenue is attributed to hay, demand for which tends to peak during adverse weather conditions.” Drought conditions typically reduce pasture quality for livestock industries, making them reliant on alternative feedstock such as hay, which helps boost industry demand. Drought conditions also increase the cost of maintaining livestock, thus prompting farmers to increase slaughter numbers to cut costs. Higher livestock slaughter numbers also support demand for hay, as it is used for finishing animals (i.e. feeding and fattening before slaughter) in feedlots. Conversely, demand for hay is moderated by the availability of substitutes such as wheat feed, the price of which has declined for much of the past five years.
Heavy rainfall and flooding during 2010-11 increased water availability, and thus improved pasture conditions for farmers. The increased water availability led to better pasture quality and the rebuilding of herds, which reduced demand for hay from feedlots and contributed to a substantial drop in revenue for that year. Industry revenue is forecast to decline by an annualised 11.1% in the five years through 2013-14 to reach $990.8 million. Revenue is forecast to increase by 3.2% in 2013-14, due in part to the dry conditions that commenced in late 2013. Other crops, such as coffee, tend to exhibit higher margins than hay. However, Australian coffee faces intense competition from cheap foreign imports and therefore needs to be marketed as a premium, locally sourced product. According to Flores, “reduced water availability over the next five years is projected to increase input costs for industry players, as the focus shifts towards increasing operational efficiency to mitigate costs.” Industry profitability is projected to slightly weaken in light of higher input costs. Rising demand for quality beef among a growing Asian middle class is projected to support a key downstream market, indirectly reinforcing demand for feed such as hay.
The Hay and Other Crop Growing industry is characterised as having a low level of ownership concentration. The industry is dominated by a multitude of small firms, majority of which are non-employing enterprises. The industry currently employs small workforces. Farmers typically only supplement their own labour with hired labour during harvest periods. Farmers typically grow hay and other crops, and are incentivised to enter and exit the industry contingent on profitability. Further rationalisation among industry producers is likely to translate into only a small drop in employment over the long run. Most producers already employ mechanisation wherever possible, so farm consolidation is unlikely to generate significant labour savings. For more information, visit IBISWorld’s Hay and Other Crop Growing report in Australia industry page.
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IBISWorld industry Report Key Topics
The Hay and Other Crop Growing industry is part of the agricultural sector and comprises businesses that produce fodder crops, such as hay and lucerne, in addition to other niche crops such as chicory, coffee and lavender.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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