Peter Hughes is in his 70s, has been in the cattle game all his life and never thought he’d see this day.
Australian cattle prices are now the highest in the world among major producers. He thinks that’s remarkable.
“Never in my lifetime have we seen the dearest cattle in the world in Australia,” he says from his home in Tierawoomba in central Queensland.
“We were always told our processing costs were too high and we’d never be top of the world, but despite all that it has happened.”
The owner of the Hughes Pastoral Company, Georgina Pastoral and Nebo Beef knows it won’t last, but will enjoy it while he can.
“For some reason or another you never seem to get too long in the sun,” he says.
Hughes is a rusted-on member of The Australian Financial Review Rich List, with his business fortune valued at $694 million this year, up from $506 million in 2019.
Mining moguls Gina Rinehart, at No. 1 on the list, and Andrew Forrest, at No. 2, both own cattle stations and are passionate about the industry, where soaring prices are like an Akubra sitting on top of their immense iron ore earnings.
Rinehart is the nation’s cattle queen through Hancock Agriculture and her controlling stake in S.Kidman & Co.
Hughes is cattle to the core and shares some of Rinehart's views on big government in Australia: "There's a new bureaucrat working on a new piece of red tape every day."
With a family history in the cattle business dating back to 1872, he's also happy to have his name on the Rich List.
“I am a great barracker for the cattle industry. We don’t do anything else,” he says. “Every bob we have got is in the cattle industry and invested in the land.
“With all the gloom you hear, it is good to see.”
Cattle producers had little choice but to send stock to slaughter in record numbers during the drought when water and feed dried up.
Now drought-breaking rains across large parts of Australia have sent cattle prices soaring as producers look to rebuild herds.
Saleyards are buzzing as prices continue to climb. The Eastern Young Cattle Indicator hit a record 821.5¢ a kilogram this week, up from 501¢ a kilogram at the same time last year.
Trevor Lee, who weighed in at No. 100 on the Rich List with a fortune estimated at $1.02 billion, says the drought was the toughest two years he has experienced in nearly five decades in the cattle business.
The Australian Country Choice owner has multiple properties across 2.4 million hectares of Queensland.
“Despite having a wide geographical spread on our 32 holdings, we had no area that was not severely impacted by the drought,” he says.
Lee praised the “tireless commitment under extreme and trying conditions” of the property managers and workers who maintained the core herd.
He estimates that cattle numbers are down about 30 per cent, or 80,000 head, on ACC properties, spread across north-western, central highlands, south-western, Carnarvon Ranges and southern parts of Queensland.
Lee has just completed an extended tour of ACC’s vast land holdings and says he is pleased with the health of the diminished herd.
The drought had broken in south-western areas but many properties needed a good wet season to get pasture going and allow restocking.
Meat & Livestock Australia expects the herd rebuild to be buoyed by summer rain in northern and eastern Australia from an earlier La Nina-influenced cyclone season.
It is tipping a slight increase to 25.1 million head in 2020-21 after a 12 per cent fall over the past two years.
MLA predicts slaughter numbers will fall to 7 million head in 2020, down 17 per cent on 2019, and national beef production will drop 15 per cent to its lowest level in almost 20 years.
Lee says restocking is a challenge with “extraordinarily high” livestock prices.
ACC is set to rebuild its herd through breeding and retention rather than buying cattle.
“There are clearly two cattle markets at the moment,” Lee says. “The restocker market for breeding cattle and young grower cattle is at price levels never seen before.
“Values being paid for young grower or replacement cattle bear no reflection to the current domestic or global meat market and are more a reflection of the desire for producers to restock their properties that have experienced a great season following the drought.”
Lee says it will take a run of average to favourable seasons over the next few years to rebuild the depleted national herd to about 25 million head.
In the meantime, feedlot operator margins remain very tight as they compete against restockers for cattle.
The high cattle prices flow through to processors and to the domestic supermarket and export trade.
With Australian slaughter cattle now the most expensive in Australia’s key export destinations, Lee says cheaper US beef is becoming a serious competitor in Asian and north Asian markets.
ACC was shipping 2000 tonnes of beef a month to China before the COVID-19 pandemic took hold but is looking to build other markets in light of the deteriorating relationship between Canberra and Beijing.
“The current geopolitical situation with China is not our preferred outcome as this market is almost our biggest and overall highest-value beef destination,” Lee says.
“That said, it appears that the issues will not be solved in the short term so we need to adjust to this new normal in our international trade strategies.”
Hughes, whose business is focused on premium wagyu production across a string of properties in Queensland and into the Northern Territory, says China “wasn’t mucking around” after banning exports from five abattoirs and putting trade sanctions on other agricultural products.
“They are making their presence felt but they shut one processing plant and leave others open,” he says.
“The markets seems to be trading freely at the moment which I’m nervous to say because in the past any sort of hiccup and the market used to really collapse. It has been remarkable through this COVID period.”
Hughes was luckier than some through the drought and is grateful for the rain Cyclone Trevor dumped on his Lake Nash property in 2019.
He says the key to long-term success are the steps taken before cattle are sent to market, constant reinvestment in infrastructure and looking after the land.
"I've been one of those lucky people who never wanted to do anything else. It is a joy to me, good or bad," he says.
Lee says it is an industry like no other in terms of challenges, opportunities, disappointments and excitement.
"I have been building our vertically integrated business model for over 50 years and it remains an absolute passion of mine and my family," he says.
"Agricultural productivity remains a key economic driver for Australia and with meat processing now being our largest manufacturing industry, it remains both a significant employer and earner of foreign revenue from red meat exports."
ACC is likely to bring forward and step up investment in its meat-processing infrastructure on the back of federal treasury incentives aimed at stimulating the economy.
It will also look to develop pasture and water infrastructure across its cattle stations to improve productivity and carrying capacity.