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Australian agriculture had a remarkable year in 2022, with high commodity prices and strong production volumes. Beef, dairy, and grain sectors all experienced excellent to record prices, benefiting from favourable seasonal conditions and global market tightness. Despite challenges such as price volatility, supply chain issues, and elevated costs, Australian farmers achieved record-high farm income. However, it is unlikely that 2023 will replicate the exceptional performance of 2022, with lower prices expected due to a global recession and inflationary pressures. In the beef sector, production volumes are slowly recovering, and while cattle prices will be softer in 2023 compared to 2022, they will remain historically high. Import demand from China and the contraction of US beef production will play a crucial role in determining market dynamics. The dairy sector also anticipates positive margins in the 2023/24 season, with ample feed availability and favourable seasonal conditions. However, ongoing recovery from flooding remains a challenge. The grain market is facing a shift in supply and demand dynamics, with historically low global stocks and increased political involvement in the trade. While the west coast of Australia expects increased demand for canola, the rest of the year appears less exciting. Grain prices are projected to ease, with a divergence between wheat and corn markets. Reduced supplies from the Black Sea region, lower Australian crop yields, and dry conditions in Russia may contribute to rising wheat prices. In contrast, corn prices are expected to decline due to large supplies from Brazil and the US. Australian agriculture is well-positioned to navigate 2023, but with lower margins compared to the exceptional year of 2022. Climate extremes, inflation, geopolitics, and supply chain disruptions are among the challenges that farmers need to address. Adapting to changing consumer behaviour and improving sustainability practices are also key priorities for the industry. While uncertainties remain, the sector remains resilient and ready to seize opportunities in the coming years.

Australian cattle markets have experienced a recent decline in prices due to an abundance of young cattle supply and challenging conditions in the US market. Although prices have reversed in the past week, there are potential risks for further volatility in 2023. Despite this, overall beef prices remain above pre-2020 levels, indicating a profitable period for many producers. Global dairy trade auctions have shown a downward trend, posing challenges for Australian processors who are dealing with falling milkflow and high farmgate prices. While farmgate prices currently remain high, there are emerging downside risks for the 2023-24 season. However, it should be noted that the current disconnect between falling global prices and high farmgate prices is not expected to continue indefinitely. Australian wheat prices have significantly declined since mid-November, primarily due to easing concerns about Black Sea supply, a stronger Australian dollar, and a large domestic harvest. However, volatility is expected to persist due to tight global stocks and geopolitical concerns. Despite this, Australian domestic feedgrain prices remain higher than the previous year, and there is an ample supply of feed-grade grain in the Australian market for 2023. ABARES forecasts record-breaking wheat production, surpassing last year's record, along with substantial production numbers for barley and canola.

The Australian agricultural commodity prices have shown a slight increase in the past two months, driven by higher wheat and cattle prices. Despite the weaker global economic outlook, agriculture continues to experience elevated prices as buyers consider seasonal and geopolitical uncertainties. Seasonal conditions have been generally supportive, with a promising winter crop expected. However, recent floods have damaged crops in parts of eastern Australia, posing risks to crop quality. While prices and yields remain strong, input costs and market volatility remain challenging factors. Global monetary policy normalization is progressing rapidly, with the US Federal Reserve and the Reserve Bank of Australia (RBA) raising interest rates. This weakens the global economic outlook for 2023, with the expectation of further rate hikes. The Australian dollar (AUD) has fluctuated amid global economic uncertainty. Wheat prices have rallied due to global supply uncertainty and the breakdown of the Russia-Ukraine wheat deal, suggesting high prices may persist. Cattle prices have rebounded, but restocker demand and feed grain costs pose uncertainties. Global dairy trade auctions have shown lower results recently, and while farmgate prices remain high, downside price risks are emerging. Cotton prices have retreated from previous highs, but with favourable growing conditions, growers remain optimistic. Persistent global inflation pressures raise the likelihood of further rate increases, leading to a projected significant global economic slowdown in 2023. While the Australian economy has remained resilient, early signs of slowing are evident, particularly in labour demand indicators and consumption measures. The central banks are expected to continue raising rates in response to high inflation. The AUD/USD exchange rate has fluctuated, with forecasts of the AUD ending the year at around 65 US cents. Australia has experienced a wet year, particularly in south-eastern regions, which has generally supported crop production. The La Nina weather pattern is expected to continue for the next few months, bringing above-average rainfall to the eastern states. However, Western Australia is forecasted to have drier conditions than usual. Farm input prices have been increasing since 2020 due to various factors, and while there are signs of stabilization, they remain elevated. Oil prices have been volatile, impacted by global events, but forecasts suggest slightly lower prices in 2023.

The recent La Niña weather pattern combined with above-average rainfall is expected to continue affecting beef production in Australia. The excessive rain has caused flooding in some regions, hindering the ability to easily quantify damage to cattle and pastures. Despite favourable seasonal conditions supporting producer demand, cattle prices have remained steady, and slaughter numbers have been low due to good pasture availability and low margins. Export volumes have also been affected, with a decrease in September after an unusual lift in August. Additionally, the Australian government's commitment to reducing livestock emissions without introducing taxes or levies may have implications for the beef industry. The dairy industry in Australia has been impacted by the La Niña weather pattern and excess rainfall. Floods and wet conditions have led to feed losses and reduced milk production in various regions, particularly in northern Victoria. Milk production has trailed behind the previous year, and consumer demand for dairy products has weakened. Cheese production has expanded, but skim milk powder production has decreased. Dairy commodity markets have experienced price declines, influenced by sluggish imports from Chinese buyers and weakening consumer confidence in China's food market. The Australian grain market is facing volatility drivers from both domestic and international factors. Unseasonal rain and flooding caused by La Niña have negatively affected crop quality and reduced tonnage. The Ukrainian grain corridor deal with Russia has been disrupted, potentially impacting global grain prices. Wheat prices reached a four-month high before retracting due to uncertainties surrounding the deal's renewal. The future of grain prices depends on how much wheat is downgraded into feed and whether the Ukrainian grain deal is permanently eliminated. Additionally, the recent flooding and weather events in agricultural regions have led to higher food price inflation, affecting the overall food supply volumes in Australia.

The heavy rains in October 2022 had a significant impact on the Australian grain industry. Prior to the rain, the grain and oilseed crop were expected to reach near record levels for the third consecutive year. However, the rains caused uncertainty about the volumes and quality of grains and oilseeds in affected regions. The impact of the rains will be felt not only in the coming harvest but also potentially in the national crop for the next few years. The late harvest, potential bottlenecks at grain ports, and downgraded grain quality could lead to logistical challenges and affect grain prices. In contrast to the grain sector, the cattle industry was less affected by the heavy rain and flooding. While some cattle were stranded for a period, major stock losses were minimal, and overall yardings remained strong. The wet weather could potentially lead to upward pressure on cattle prices in the future. The rain's impact on crop volumes could result in a larger availability of feed grain, benefiting cattle producers. As a result, some grain producers may choose to reduce plantings and increase livestock numbers, including cattle. The wet paddocks and greener pastures may also lead to higher sale weights and prices for weaners. The Australian beef industry faced challenges in its exports, with overall figures down compared to previous years. Beef exports for October 2022 were the lowest since 2016, partly due to increased competition from larger volumes of US beef. While the decline in exports can be attributed to various factors, including the rebuilding of domestic cattle operations and reduced demand from South Korea, Australian beef exports continue to face strong competition from the US. The forecast for strong US herd slaughter until late 2023 further contributes to the competitive landscape. In the dairy sector, falling milk production in Australia has led processors to review their processing capacity to match lower supply. Global Dairy Trade auction prices have been on a downward trend since early 2022, influenced by weak global consumer sentiment and demand. Despite the challenges, Australian dairy farmers have been supported by good opening prices, favourable weather conditions, and the potential for increased profitability. However, high feed prices, uncertain demand from China, and a downward trend in global prices pose concerns for the industry. Recent announcements of processing capacity review and shutdowns by major processors indicate the challenges faced by the Australian dairy industry.

The Bureau of Meteorology (BOM) has raised the ENSO outlook to La Niña, resulting in cooler ocean temperatures and above-median rainfall expected for the Eastern half of Australia until the end of 2022. The wet conditions have led to above-average soil moisture and high storage levels in the Murray-Darling Basin. Despite weaker beef prices, cattle prices are expected to remain firm due to favourable seasonal conditions. New Zealand's milk production has been affected by weather risks, with a decline of 4.9% in August. However, US milk production has shown a strong gain, and EU milk supply is showing positive signs. China's import volumes continue to decline, impacting global markets, but other importers are taking advantage of lower prices. Australian milk supply started weak but is expected to stabilize as the season progresses. CBOT wheat, corn, and soybeans experienced mixed performance in September. Rabobank has increased its 12-month CBOT wheat price forecast, anticipating elevated global prices due to dry planting of US and EU winter wheat and concerns over the UKR-RUS grain deal. Global corn ending stocks are expected to decline, especially if the US corn harvest deteriorates further. Local grain prices in Australia are expected to be influenced by large supplies and the upcoming harvest season.

New Zealand's milk production in August 2022 was down 4.9% compared to the previous year, resulting in a decrease in milk supply. However, beef exports remained strong, with export volumes increasing by 13% year-on-year. Demand from China, Japan, and Korea supported the farmgate schedule, while demand from the US remained soft due to ample supplies of lean trimmings. The beef pricing schedule is expected to remain elevated in the coming months, supported by a favourable exchange rate and strong demand from China. Consumers are starting to show resistance to high prices, leading to a shift towards lower-value cuts and proteins. New Zealand's milk production for the month of August was the lowest in five years, resulting in a decrease in milk supply for the season. Lower imports from China and reduced purchasing activity have stabilized Oceania commodity prices. While the Chinese market continues to show a decline in import volumes, other importers are taking advantage of lower prices. The local supply, ample inventories, and soft consumer demand are contributing to reduced import purchasing. However, the attention remains on New Zealand's milk supply as the seasonal peak hits its stride. The Baltic Panamax index, a proxy for grain bulk freight, rebounded in September, supported by strong volumes from South America. The OPEC+ meeting in September resulted in a supply cut, and further cuts are likely in the upcoming meeting.

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Australian agricultural commodity prices have experienced a downward trend, with beef, dairy, and grain prices all being affected. The decline in prices comes despite favourable seasonal conditions but can be attributed to elevated input costs and rising interest rates globally. While input costs have stabilized for now, the fertiliser index saw a 7.5% increase in August, posing a challenge for producers. Additionally, the formation of a third consecutive La Nina event, with a 70% chance, could further impact agricultural conditions. The dairy sector has seen a decline in global trade auction results, but farmgate prices remain strong due to competition among processors for milk. However, there is a risk of margin squeeze for processors in the coming months. Grain prices have been influenced by higher interest rates and global recession fears, causing fluctuations. Extreme weather events in key growing regions and the potential for a La Nina event have added pressure to the global supply picture. Australian grain prices have been relatively stable compared to international spikes, and favourable seasonal conditions are expected to lead to an above-average crop. Beef prices experienced a crash in June and July but have rebounded recently. Although seasonal conditions remain supportive, a weaker global growth outlook and high input costs have affected sentiment. Lamb prices have been falling, and the market may experience downward pressure with the upcoming spring flush. The wool market has seen flat to lower prices after a decline in the price run-up. Overall, prices for beef and lamb remain historically high, although the recent decline in prices has surpassed expectations.

The Bureau of Meteorology (BOM) has raised the La Niña alert with a 70% chance of La Niña developing this spring in Australia. The outlook predicts above-average rainfall for most of Northern, Central, and Eastern Australia, which is favourable for beef production. However, below-average rainfall conditions are expected in Western Australia and western Tasmania. The cattle market saw a correction in prices in August, with cattle prices dropping and opportunistic traders re-entering the market. Saleyard numbers were low, indicating strong producer demand and the expectation of sustained strong prices. The Oceania dairy commodity complex, including Australia, experienced falling prices in August, with declines in milk powders leading the way. China's import demand has slowed, impacting global dairy demand signals. Australia's milk supply also declined in the 2022/23 season due to industry consolidation and unfavourable weather conditions. Rising dairy prices in retail and foodservice channels, along with cost-of-living pressures, have hampered end-user demand in price-sensitive emerging economies. The New Zealand spring peak is expected to bring more milk this season, which will influence the global market balance and commodity price direction. The grain market has seen volatility in prices, influenced by various factors. The Indian Ocean Dipole (IOD) has moved negative, increasing the chances of above-average winter-spring rainfall in Australia. Soil moisture is above average in many parts of the country, with flood risks remaining for Eastern Australia. CBOT wheat, corn, and soybeans prices finished mixed in August, influenced by dryness in the US, EU, and China. Rabobank has marginally downgraded its CBOT wheat price forecast but still expects prices to remain above average due to below-average global stocks. Canadian and Australian crops are expected to contribute to large canola harvests, affecting prices and exports.