THE IMMINENT closure of Cargill’s aged oilseed crushing plant at Narrabri in north west New South Wales has thrown a googly into the input matrices of many a cattle feeder.
It appears that the closure announced by Cargill early this month had been a long time coming.
The current drought may have been the catalyst that triggered the decision, but it seems the business model was already long broken.
Such is the state of the cottonseed-crushing industry that the Cargill plant, the only one in northern NSW, appears to have turned its last profit in 2014.
Tough trading conditions since then, including the bumper cotton-crop year of 2017, have turned profits into loss.
The latest has shown up as a $3.1-million loss in the half-yearly results released this week of Namoi Cotton, holder of a 15-per-cent stake in the Narrabri plant.
Ginner and grower, Auscott, is also believed to have lost money through its comparable investment in the plant.
With Cargill as the operator, the owners had made efforts to continue operating to the end of this season, which typically would see current-crop supply continue until March 2019, but its feedstuff customers were already in turmoil in August, when the mill’s feed byproducts, hulls and cottonseed meal (CSM) they believed the Narrabri plant would outload to them failed to materialise.
In its statement announcing the closure, Cargill said it had decided to shut Narrabri because it was unprofitable, and cited competition for whole cottonseed from the feed market, and high energy costs tied to the plant’s operations, as contributing factors.
The plant’s closure is a big deal because locally crushed cottonseed products have a very high value in feed rations for beef cattle in particular.
The quantities are significant; industry opinion is that the annual Australian crop of around four million cotton bales yields around 1.3 – 1.4 million tonnes (Mt) of whole fuzzy white cottonseed.
Cottonseed oils manufacturers have capacity at present to use a maximum 300,000t of seed from which splits into three roughly equal portions of oil, CSM and hulls, with each containing portions of oil for energy, protein and fibre.
While the quantities are not large, per se, the closure is a big deal for users because the products fitted their uses so well, they were vulnerable to change and felt poorly informed by the suppliers and market channels.
Now that the closure of the Narrabri plant is a done deal, the users have to undo decisions they made this year towards securing supply, and step into planning mode again for their inputs, production and sales into 2019.
Not lost in this equation is the explosion in demand for whole fuzzy white cottonseed in its ginned, but otherwise unprocessed form.
This has confirmed cottonseed’s intrinsic value in animal feeding, and discounted the relative value of CSM to many users, skinning the margin for the industrial processor.
Beyond CSM
Manufacturers of loose feed supplement and lick blocks relied heavily on cottonseed meal, with blocks benefiting from the binding properties of cottonseed meal.
Agricon managing director James Dickson said of its four main alternatives — canola meal, dried distillers’ grain (DDG), palm kernel expeller meal (PKE) and soybean meal — canola meal was the best.
“Canola meal is the most similar for us, but there is just not enough of it.”
Mr Dickson said the physical properties, as well as the nutritional value, of various meals determined the types of protein meal manufacturers could put into blocks.
“That’s where the drier, lower fat and oil-content ones like cottonseed and canola work better.
“Some of the suppliers this year have really let this industry down.
“Block manufacturers once used lupins, but supply became unreliable so they moved to the bypass protein meals where supply was more regular and safer to get, but cottonseed meal has gone the same way.”
Mr Dickson said suppliers of various inputs, including cotton by-products and the sugar industry by-product, molasses, for stockfeed supplements needed to keep their buyers better informed, because forward planning on inputs was critical for businesses.
Similarly, the biosecurity of inputs is seen as critical for companies planning where there manufactured products could go, domestically and for export.
Beyond hulls
The prime value which hulls provide to beef feedlots is fibre; energy is secondary.
While they are a typically a low-cost, low value input, they are surprisingly difficult to replace with other non-grain feed ingredients (NGFI).
Almond hulls fit the beef feedlot ration, though they are scarce.
“Some almond hulls were available recently, but over a number of months they’ve been hard to get,” nutritionist Integrated Animal Pproduction principal Rob Lawrence said.
“Fibre in a feedlot ration, though it might be the cheapest input by weight, is often the most expensive because it can dilute the energy density of the ration.
“Almond hulls do contribute some energy, though whole cottonseed has a very beneficial combination of fibre and energy.”
Almond hulls traders said drought in 2018 had exerted pressure on supply and price of hulls to feedlot rations in northern NSW and southern Queensland.
One trader said new-crop almond hulls were being offered for early 2018 delivery to the Darling Downs at $380/t , cheaper than the peak of values during winter 2018, but almost double the price of almond hulls a year earlier.
Imported meal an option
Manufacturers said producers of feed supplements could use imported soybean meal in their formulations.
Quantities already consumed by poultry and pigs have increased at least tenfold in 30 years, reflecting not only the expansion of numbers of animals being fed, but also the value to producers of consistent quality and availability.
“Demand for soybean meal could touch 1Mt in 2019,” Energreen Nutrition managing director Gary Seaton said.
Import supply of other protein meals had become a well-oiled machine over several decades.
The availability, and import, of PKE meal from Australia’s northern neighbours has increased from perhaps 30,000t in 2017 to likely more than 100,000t in 2018, and trade sources said market demand could increase that number significantly in 2019.
DDG, a by-product of alcohol manufacture, is widely available both from domestic producers of beer and industrial ethanol, and from imports.
Site decision pending
In a statement, Cargill said it was currently reviewing a number of options regarding the Narrabri plant.
“Our current focus is on finalising our cottonseed-crushing operations at Narrabri, and then proceeding to safely shut the operations, which should occur by end November,” a company spokesperson said.
“Following closure, we will keep on a number of employees to maintain the site, and will make a decision regarding the site in the New Year.”
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