The number of sheep sent to the Middle East fell to 479,781 in 2021-22, marking one of the few times in the history of the industry that Australia has exported more cattle (612,618) than sheep.
Wellard, backed by Paul Holmes a Court, reported its third consecutive full-year profit on Tuesday after struggling to stay afloat in the years after its 2015 debut on the ASX.
Executive chairman John Klepec said Indonesian cattle importers were not prepared to gamble on Australian cattle staying disease-free once they landed in the island nation.
“The outbreak of lumpy skin disease (LSD) and foot and mouth disease (FMD) in Indonesia has resulted in trade between Australia and Indonesia slowing to a comparative trickle as Indonesian feedlots are reluctant to purchase large numbers of high-priced Australian cattle, fearing that if cattle in their feedlots contract either disease, they will be forced to liquidate every single animal on their premises at reduced or no commercial value,” he told shareholders.
“This may have existential consequences for their business.”
Mr Klepec said a national vaccination program should provide the confidence for the trade to bounce back in 2023 after the wet season in northern Australia.
“An actual outbreak of LSD or FMD in Australia would not change the current market as it is effectively closed now until Indonesian importer confidence returns,” he said.
Mr Klepec said the Vietnam market was subdued throughout 2021-22 on the back of very high Australian cattle prices that made imports uneconomic.
However, there have been some shipments to Vietnam to start 2022-23 after an easing in cattle prices.
Wellard, which charters three livestock carriers for cattle exporters, said the decline in Australian prices would need to continue to sustain trade with Vietnam.
Charters challenged by live export bans
The Fremantle-based company expects the trade in breeder and dairy cattle from New Zealand, Australia and Uruguay to North Asia to make up most of its charter work in 2022-23.
Wellard loaded 20 charter voyages in 2021-22 on its way to net profit after tax of $9.9 million, up from $1.1 million last year, and earnings before interest, tax, depreciation, and amortisation of $21.6 million ($11.6 million).
It recently repurchased the Ocean Ute from financiers and leases another of its vessels, the Ocean Swagman, from Mr Holmes a Court.
Mr Holmes a Court, the brother of Climate 200 founder Simon, operates six cattle stations in northern Australia and owns a 16 per cent stake in Wellard through Heytesbury Holdings.
The New Zealand government is ending livestock exports from its shores on April 30, 2023, and the Albanese government has promised to phase out the sheep trade from Australia.
Wellard vessels have not been chartered to move sheep in the past two years as countries in the Middle East look outside Australia for supply on the back of restrictions already in place after a series of animal welfare controversies. The restrictions include a ban on shipments during winter in Australia.