Farm services group, Ruralco Holdings, is moving into beef lotfeeding as an extension to its growing Frontier International Agri livestock export operations.
The agency, farm supplies and commodities marketer is currently establishing a trial custom feedlot program on a leased 10,000-head capacity South Australian site to supply domestic meat markets and the export trade.
Diverse Ruralco has just reported a record half-year profit of $10.8 million - up three per cent on the same time last year - helped by solid growth from its agency businesses, water activities and live export sales.
It will pay shareholders a fully franked interim dividend of eight cents a share (a 54.8pc payout ratio) - down slightly on the nine cents announced a year ago.
“Vertical integration into the feedlot sector has always been part of our long-term agenda,” said Ruralco managing director, Travis Dillon.
“We see the southern feedlot and a new backgrounding and finishing program in northern Australia as complementing our live export business and a first step in developing this strategy in coming years.”
Ruralco recently leased two grazing properties close to Darwin, also capable of running about 10,000 head, where Frontier will hold cattle it buys for the export trade.
At the same time Mr Dillon is tipping a recovery in the once bustling dairy heifer export trade to China following the past year’s slump in long-haul shipping activity.
He also anticipated regular beef cattle exports from Australia to China should start in the coming financial year as Chinese import protocols and new stock handling infrastructure at port were put in place.
Despite greater competition for cattle export contracts on short-haul routes to Indonesia and Vietnam, Frontier contributed $4m (up 18 per cent) to Ruralco’s $11.5m underlying net profit after tax in the six months to March 31.
That included dairy heifer shipments at a time when other exporters were pulling out of the China market.
Mr Dillon said dairy heifer exports, which had helped compensate for Frontier’s reduced beef cattle orders to Vietnam, were showing signs of recuperating.
While global dairy prices were still depressed, partly because of big milk product stockpiles in China, Mr Dillon said Chinese dairies appeared to be returning to herd expansion and heifer import activity.
He said the Darwin backgrounding facilities would give the company’s shipping program more flexibility to assemble stock for shipment, and the ability to buy and hold cattle when prices were attractive.
Frontier, which was launched two and a half years ago, leases two livestock ships.
Meanwhile, in the farm supplies segment, Ruralco has just expanded further into generic crop chemical products with a deal to market adjuvant lines made by Japanese industrial giant, Marubeni.
Early this year Ruralco’s house brand herbicide, insecticide and fungicide range, Relyon, launched to give broadacre and horticulture producers a discount crop protection option.
Mr Dillon said exclusive access to Marubeni’s private label products was now being followed up with local agronomy evaluation trials.
Rural supplies division gross profit in the first half of 2015-16 lifted 7pc above figures reported a year ago.
Mr Dillon believed more competitively priced wholesale lines available to the CRT merchandise network also contributed to seven new retail members joining the CRT network in the past six months.
Meanwhile, more customers, increased restocker demand and higher livestock prices lifted the company’s livestock business gross profit 10pc above results of a year ago.
Real estate gross profit jumped 19pc.
Strong domestic and offshore demand, fuelled by good livestock prices, had prompted renewed activity in the large rural property market.
