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The cattle industry is experiencing a period of lower prices and high costs in 2023, prompting producers to reassess their budgets and prepare for the future. After the record-high cattle prices of early 2022, prices have contracted, leading to a more stable market in 2023. Cattle slaughter and beef production are expected to rise, with a projected increase of 16% in slaughter numbers and 7% in production. However, despite the increase in numbers, weaker producer demand and slower economic conditions may impact beef demand and keep cattle prices from experiencing significant fluctuations. The global and domestic beef markets will be influenced by slower economic conditions, declining US production, and softer consumer demand. While Australian beef exports are expected to rise by 10%, mainly due to increased production, growth in markets like Japan and South Korea is not expected. The US market presents opportunities for export growth, given its declining beef production and strong consumer demand. China also provides opportunities, but competition from rising Brazilian volumes and the strength of the Chinese economy may pose challenges. Feedlots faced difficulties in 2022, with high numbers of cattle on feed, increased feed prices, and falling fed-cattle prices. However, 2023 is projected to be a better year, with stabilizing cattle prices. The rebuild of the US beef cow herd is expected to face challenges, such as increased production of other proteins, higher interest rates, and rising feed costs. China's beef consumption continues to grow, but consumers are becoming more discerning, and volumes may remain stable. Australia is expected to benefit from lower cattle prices and increased supply to China, offsetting reduced US volumes. Live exports are projected to increase as cattle numbers grow, with Indonesia remaining the main destination. However, the impact of foot-and-mouth disease and limited local cattle supplies in Indonesia may affect the market. Cattle prices are expected to hover around current levels in 2023, with the Eastern Young Cattle Indicator projected to be in the range of AUc 700 to AUc 800/kg cwt. While cheaper cattle improve competitiveness, softer global economic conditions may lead to a contraction in demand.

The month of April saw mixed results for the beef market. Cattle prices stabilised, indicating a return to normalcy and support for prices at current levels. However, there was a decline in live cattle exports, and cattle on feed numbers remained relatively steady. Export volumes to key markets such as the US, South Korea, and China saw significant increases compared to the previous year. Overall, the beef market is cautiously optimistic, but the large volumes in storage in China and soft consumer markets pose challenges. The upcoming season's milk price is expected to be lower than the current high levels, but historically elevated milk prices will still support farmgate margins. The decline in milk production in Australia moderated in March, with stability seen in Western Australia and growth in Tasmania. However, eastern Victoria experienced the largest volume falls. Oceania commodity returns showed resistance in April, with year-on-year commodity prices down significantly. Live dairy exports to China underwent a major change, potentially impacting the demand for heifers from Australia. CBOT Wheat and Corn prices declined in April, while Soybeans remained mostly unchanged. The successful operation of the Black Sea grain corridor and strong Russian wheat exports cooled wheat prices. However, EU disunity on Ukraine's western border and threats from Russia create upside risks. Canola prices increased, particularly for Australian non-GM track prices. Fertiliser markets showed different paths, with nitrogen prices rising due to increased demand, while phosphate and potash markets sustained similar fundamentals with oversupply. The Australian food price inflation eased but remained elevated, with mixed results across the food basket and deflation observed in lamb prices.

FEEDER cattle prices and the cost-of-gain in grainfeeding those animals have lined-up again, for the first time in three years.

Slide in Wagyu F1 prices puts pressure on supply chains

The Australian beef industry is facing challenges in attracting labour, which may impact cattle volume purchases and prices. However, there may be a degree of restocking activity in the market due to a reasonable weather forecast and increasing confidence among producers. While beef exports have been sluggish, there are optimistic signs for later in the year, particularly in the China and US markets. The Australian cattle herd is forecast to reach its highest level since 2014 in 2023, driven by a strong growth rate. However, prices may not rise significantly due to the struggle to attract labour in the meat processing sector. Global dairy supply is growing steadily, with strong production from the European Union. Global prices have dropped significantly from their peaks in March 2022, and the Global Dairy Trade (GDT) auctions have seen a series of price declines. Weak consumer demand in China and concerns over future consumption have contributed to the decline in global dairy prices. Domestically, Australian milk production continues to fall, impacting the export surplus and putting pressure on margins for export-oriented processing. While higher domestic prices maintain profitability for producers, volatility and production costs are high. The Australian cropping sector is potentially poised to see its third record harvest in a row, with the overall winter crop and production volumes for wheat, canola, and lentils potentially reaching record levels. However, heavy rains in late 2022 will strongly impact crop volumes from New South Wales, which are likely to be markedly down. Pulse crops are also expected to see reduced volumes, partly due to reduced plantings as growers focus on major crops. Prices for major crops are down from last year's highs, and the reasonable production forecasts from the Northern Hemisphere are expected to limit substantial price increases. Australian grain growers may face high crop input costs but are still likely to plant a large crop given the reasonable weather outlook.

Sorghum departs as feedlot rations evolve