FARMERS holding Friesian dairy heifers for live exporter Wellard Rural are feeling less of the holiday season's high spirits.
Weekly Times Now understands Wellard has renegotiated contracts for about 3000 Friesian heifers, changing prices and delivery dates, after deals with Chinese buyers fell through.
A spokesman for Wellard, one of Australia's largest live export companies based in Western Australia, confirmed on Monday that orders had been changed.
"Delays in dairy infrastructure construction and a general softening in demand has prompted some Chinese buyers to cancel contracts for dairy heifers," the spokesman said.
"Unfortunately this has required a restructure of Wellard's dairy aggregation and shipping program, which we have been communicating to stock agents and farmers in the past weeks.
"Shipments to China will continue, as it remains an important market, but at reduced levels in the short term."
Feedback this week from dairy heifer buyers was the Chinese market had "soured" to the point there was few active orders in the marketplace, and the extreme demand which had characterised the trade and created big price tags of $1000-a-head-plus for Friesian calves weighing as little as 180kg no longer existed.
"It's gone from the big four (live export companies Wellard, Austrek, Elders and Landmark Global Exports) doing around a load each month to China, to maybe just one shipment going out every two months," the buyer, who asked not to be named, said.
"The slowdown is from the purchasing end and my understanding is that, while there are some difficulties caused by weather at the moment, the Chinese just aren't prepared to buy heifers at any cost like they have been doing."
It means for farmers caught up in the Wellard situation, they either had to accept the new terms the company was offering or take the risk of trying to find another order for the heifers in a softening market.
Weekly Times Now understands that some heifers have been sold for export to Indonesia and Malaysia, although this outlet traditionally operates at a lower price level compared to the premium Chinese market.
It is understandable those who had signed contracts with Wellard are upset that they held and fed cattle they thought had been sold, and now face the prospect of reworking cash-flow and budgets and potentially feed cattle in a tight season.
"It will have a big impact on some people, and my question out of all this is what value is there in these sale contracts that we all sign," said a North East Victorian agent who has clients caught in the Wellard situation.
One heifer buyer, however, was quite candid about the value of contracts: "There are so many outs in these contracts it is not funny and I would say they are not worth the paper they are written on."
Legally, it usually costs too much for farmers to contest contracts which aren't honoured and dealing with a perishable item adds another layer of complexity.
And the big companies know this and for them, aside from some bad public relations, walking away from contracts is not that risky.
Apart from cattle, it has been done in the past with lamb contracts.
Although to be fair to Wellard, it seems they did try and work with most farmers rather than just completely walk away from the deal.
But "renegotiation" doesn't change the fact that farmers didn't get the deal they originally signed up to.
Currently, the best offer around for export Friesians is about $1050 for heifers of joinable size.
At the peak of the trade, these 300kg-plus heifers were worth up to $1500 so prices have corrected by about 30 per cent.
The big issue is that the Chinese orders underpin prices for dairy heifers, as shipments to China in the past two years have accounted for more than 70 per cent of all live sales.
The slowdown in Chinese demand could have a significant impact on prices, and also on the weight specifications farmers have to meet with calves.
Buyers said with fewer orders from China in the pipeline, the practice of live export companies buying light calves to background as insurance so they could meet future shipments was likely to cease.
