Lower rainfall over the four years through 2014-15 is anticipated to lift demand for hay feed.
Melbourne, Australia (PRWEB) February 11, 2015
Operators in the Hay and Other Crop Growing industry in Australia have encountered difficult trading conditions over the past five years, exhibiting large swings in revenue. This is due to fluctuating demand from livestock farmers, caused by changing rainfall levels. Industry revenue is projected to decline by 11.2% annualised over the five years through 2014-15, to reach $1.4 billion. According to IBISWorld industry analyst Brooke Tonkin, “this poor performance is due to the combination of a high revenue base year and severe revenue decline over the two years through 2011-12.” Demand for hay, which accounts for the majority of industry revenue, tends to peak during adverse weather conditions. Drought conditions typically reduce pasture quality for livestock industries, making them reliant on alternative feed such as hay, which helps boost industry demand. Drought conditions also increase the cost of maintaining livestock, which can prompt farmers to increase slaughter numbers in order to cut costs. Higher livestock slaughter numbers also support demand for hay, as it is used for finishing animals in feedlots. However, demand for hay is moderated by the availability of substitutes such as wheat feed, the price of which has declined over much of the past five years. A decline in the price of alternative feeds leads livestock farmers to use less hay, to the detriment of the industry.
When the drought broke in 2009-10, heavy rainfall increased water availability and improved pasture conditions for farmers. Persisting high rainfall the following year contributed to plummeting industry revenue over the two years through 2011-12. “Ongoing soil moisture and high pasture quality led to reduced demand for hay, depressing prices and industry revenue,” says Tonkin. Lower rainfall over the four years through 2014-15 is anticipated to lift demand for hay feed once again, as pasture feed conditions deteriorate. Industry revenue is forecast to increase only 0.5% in 2014-15, due to an anticipated reduced harvest. The industry displays a low level of market share concentration.
Rising demand for quality beef among a growing Asian middle class is projected to boost a key downstream market, indirectly reinforcing demand for hay feed. However, reduced water availability over the next five years is anticipated to increase operating costs for Hay and Other Crop Growing industry players, as the Murray-Darling Basin plan is expected to increase water costs. Consequently, industry profitability is forecast to weaken.
For more information, visit IBISWorld’s Hay and Other Crop Growing industry in Australia report page.
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.
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