News - General Agriculture Articles

Australian beef prices have experienced a sharp decline since mid-June, attributed to various factors such as rising input and transport costs, higher interest rates, global growth uncertainties, and staff shortages due to COVID-19. Despite supportive seasonal conditions, the market remains uncertain. However, prices still remain relatively high compared to historical and international standards, with a forecast for prices to remain above pre-2020 levels into 2023. Global dairy trade auction results have been decreasing, although farmgate prices are generally strong due to high demand and competition for milkflow. However, this poses a risk of margin squeeze for processors. The wool market has seen some weakening before the winter recess. Overall, the dairy sector is experiencing challenges amidst higher interest rates and concerns about a global economic slowdown. Grains, particularly wheat, have been affected by rising fears of an economic downturn and uncertainties related to geopolitical events such as Russia's invasion of Ukraine. Wheat prices have dropped, although they remain elevated compared to pre-February levels. The global supply picture for grains is mixed, but demand fundamentals remain strong. Australian seasonal conditions are mostly supportive, and the country is expected to have an above-average crop this season. Australia is likely to remain a key supplier in the global grain market due to ongoing demand and limited impact from lower global growth.

The Bureau of Meteorology predicts above-average rainfall for large parts of Australia this winter, except for Western Australia and western Tasmania, where average and below-average rainfall is expected. Despite a wet start to the year, rainfall in June was below average for Australia. May beef exports showed a year-on-year increase for the first time in eight months, indicating an increase in cattle supplies and beef production. Global beef markets remain strong, supporting finished cattle prices. May milk production in Australia was down 6.6% year-on-year, but record-high milk prices are expected to stabilize milk supply in the new season. Dairy company margins are under pressure due to high milk prices, impacting retail and foodservice businesses. The Netherlands' dairy sector faces challenges due to the need to reduce nitrogen levels in water and soils. The strength of New Zealand's peak milk production for the new season will test global market fundamentals. Global fertiliser prices have declined but remain above their five-year average, with potential upward price pressure driven by energy prices and seasonal demand. Changing ideas on Black Sea grain production and export volumes will impact prices. Government trade barriers and EU biofuel policies are increasing volatility and affecting grain pricing. The EU's decision to turn off the Russian gas tap will impact gas prices and N fertiliser production costs. Interest rate hikes and inflation concerns contribute to a volatile market.

The New Zealand beef sector is experiencing favourable conditions. Strong global demand, particularly from China and the United States, has been driving beef prices higher. New Zealand's beef exports are expected to increase due to rising demand and the country's reputation for high-quality, grass-fed beef. However, challenges such as supply chain disruptions and tightening feed availability due to drought conditions are expected to impact beef production and export volumes in the short term. The global dairy market has been characterized by supply tightness, pushing milk prices higher. New Zealand, as a major dairy exporter, has benefited from this trend. New Zealand's dairy production is recovering from the impacts of previous weather-related challenges, such as droughts and floods. However, there are concerns about the increasing cost of inputs, including feed and fertilizers, which could potentially impact the profitability of dairy farming in the future. Droughts and heatwaves have led to reduced yields and quality issues for crops like wheat and barley. This has resulted in a tighter domestic supply and increased reliance on grain imports. Global grain prices have been surging, driven by strong demand and supply disruptions in major producing regions. New Zealand grain farmers are facing increased input costs and challenging market conditions, which may limit their profitability in the short term.

Beef prices have remained relatively stable over the past few months. Despite good weather conditions and excellent growing conditions, rising feed costs present a challenge for feedlot operations. While cattle prices remain elevated compared to historical norms, there may be smaller downside risks due to global inflation. However, the impact of rising interest rates on consumer demand for Australian beef is uncertain. Global dairy trade prices have seen a decline since autumn, primarily driven by weaker cheddar prices. However, opening prices for the next year are excellent, providing a strong foundation for the dairy industry. With prices at $8.50/kgms for Saputo and $8.25 for Fonterra, dairy farmers can expect favourable returns in the coming year. Global grain prices have slightly eased from their peak a few weeks ago but remain above historic norms. Several factors, including Russia's invasion of Ukraine, drought in Europe and parts of Africa, and supply chain challenges, have contributed to the pressure on grain buyers. Australian wheat, on the other hand, is competitively priced compared to international benchmarks, and the country is expected to be a key grain supplier in the coming year. The growing conditions for the 2022-23 season are generally good, with a possibility of excessive water in some eastern areas. The potential development of a La Nina event in spring poses both opportunities and risks for grain production and international markets.

Queensland and New South Wales experienced high levels of rainfall, which benefited the beef and dairy industries as soil moisture levels were above average. However, rainfall conditions were below average in southwest Western Australia and parts of South Australia, affecting grain production in those regions. The USDA's May report indicated a decline in global wheat stocks, with challenging outlooks in Ukraine, the US, France, and India contributing to supply tightness and potentially impacting prices. Despite the tight global market, Australian wheat production is expected to be above the five-year average, providing some optimism. Australian milk production experienced a decline compared to the previous season, but milk price increases have provided support to farmers. Record milk prices for 2022/23 are expected to boost confidence and cashflow for dairy farmers. However, cost headwinds, such as purchased feed and homegrown feed costs, pose challenges for the industry. The outlook for milk prices in Southern Australia for the upcoming season is optimistic, with forecasts ranging between AUD 8.00 and 8.80 per kilogram of milk solids. In the beef industry, widespread rainfall in eastern Australia supported eastern weaner cattle prices. However, restocker steer prices in New South Wales showed a smaller gain compared to Queensland, indicating the influence of seasonal factors on the cattle market. National cattle slaughter numbers in Q1 were the lowest since Q4 1985, primarily due to restricted capacity and labour shortages. Beef exports and live cattle exports declined, with disease issues in Indonesia further impacting live cattle exports. The increase in cattle on feed raised questions about feedlot margins and the potential impact on feeder prices. Sino-Australian relations saw positive developments with the reinstatement of licenses for Canada's canola traders to export to China and calls for China to remove tariffs on Australian coal, wine, and barley. The change in the Australian government presented a promising opportunity for the removal of barley tariffs. However, tensions in Sino-Pacific nations and ongoing trade developments with the US remain significant factors to consider. The Australian dollar faced both good and bad news, with its struggle to push above USD 0.70 being favourable for export returns. However, concerns over Chinese economic growth and weaker commodity prices, along with USD strength, affected the currency's performance. The Reserve Bank of Australia (RBA) raised the cash rate for the first time in over a decade, signalling more interest rate hikes to fight inflation. The AUD has recently recovered above 0.70 against the USD, but its sensitivity to global growth risks remains a factor to watch. Crude oil prices continued to rise, driven by policy uncertainty and the EU's efforts to ban oil imports from Russia. Global container rates faced downward pressure due to the war in Ukraine and China's COVID-19 lockdowns, leading to temporary lower demand. Congestion at ports and declining on-time arrival of ships contributed to cancelled sailings and impacted container rates. The Baltic Panamax Index, a proxy for grain bulk freight, is expected to rise as demand from state buyers increases. The global trade of grains and oilseeds is forecasted to rebound in 2022/23 after a slight decline in the current season.

New Zealand's beef export volumes have dropped below the five-year average due to delays in the supply chain caused by processing and retail challenges. The lockdowns in China have affected exports to the country, although consumers in Shanghai have been stockpiling beef. Competition from cheaper Brazilian imports has also led to a decline in prices. However, the farmgate beef price is expected to remain elevated during the winter months due to a tight global supply situation. Global dairy commodity prices have seen a downward trend due to weaker demand and the fallout from events in Ukraine and the COVID-19 pandemic. New Zealand's milk supplies have been lower compared to the previous season, driven by average weather conditions. Despite the challenges, dairy commodity prices are expected to remain volatile, with weak global milk supply supporting prices at elevated levels. Uncertainty in China, the largest importing country, may impact demand prospects. The Baltic Panamax Index, which serves as a proxy for grain bulk freight, is on the rise, indicating strong demand from state buyers. Global trade of grains and oilseeds is forecasted to increase after a slight decline in the current season. However, the growth rate remains lower than in previous years. Delays in shipping and congestion at ports have affected global trade, but the situation is expected to improve as congestion in Asian ports eases. The EU's ban on Russian seaborne oil imports may lead to increased fossil fuel prices, potentially impacting input costs for fertiliser and agrochemical manufacturing.

Global beef markets have experienced significant disruptions due to export bans and restrictions. For example, Argentina, one of the world's largest beef exporters, imposed a ban on beef exports in 2021, causing global beef prices to rise. This led to increased demand for alternative suppliers such as Brazil and the United States. The beef industry in Australia, another major exporter, has also faced challenges. The country's herd size hit a 30-year low in 2022 due to drought and destocking activities, resulting in reduced beef production. As a consequence, cattle prices in Australia are expected to remain high for the next few years. Export bans and restrictions have also affected the global dairy industry. Malaysia, a significant chicken exporter, implemented a ban on chicken exports, impacting neighbouring Singapore, a major consumer. This has led to increased demand for alternative dairy products such as milk and cheese. In addition, New Zealand, one of the largest dairy exporters, has faced its own challenges. Adverse weather conditions, coupled with a drop in milk production, have impacted export volumes. The price of dairy products, including milk powder and butter, has increased as a result, affecting global markets. The grain industry has witnessed disruptions caused by export bans and restrictions as well. Egypt, a major wheat exporter, imposed a ban on wheat exports to secure domestic supply, leading to higher global prices. As a result, countries reliant on Egyptian wheat, such as Saudi Arabia and Indonesia, have had to seek alternative suppliers. Furthermore, adverse weather conditions have impacted grain production in several regions, including droughts in the United States and Australia. This has led to reduced crop yields and contributed to tightening global grain supplies, affecting prices and trade dynamics.

Australia's prolonged La Nina weather event, coupled with a negative Indian Ocean Dipole (IOD), is expected to bring above-average rainfall for much of the country's winter crop. While this presents upside potential for the 2022-23 Australian winter crop, it also raises risks to global grain production, posing challenges to global food security. Inflationary pressures are mounting, leading central banks, including the Reserve Bank of Australia (RBA), to raise interest rates. The resulting strengthening of the USD, along with ongoing COVID-19 lockdowns in China, creates higher volatility risks for the AUD. This situation poses challenges to the beef industry, as higher input prices and uncertain exchange rates affect global agricultural profitability. Global economic risks, such as the war in Ukraine and energy shocks, are adding to the overall uncertainty. Central banks' increasingly hawkish stance in response to rising inflation may lead to policy mistakes if rates need to be pushed above "neutral" levels. The convergence of multiple shocks impacting the global economy simultaneously raises the risk of a recession in a major economy, which could further affect the agricultural industries. The NAB Rural Commodities Index experienced its first drop since March 2021, but is expected to reach another record high in May. The surging global grain prices, driven by various challenges like Russia's invasion of Ukraine, droughts in Germany, France, and parts of Africa, and supply chain disruptions, pose both opportunities and risks for grain producers. Australian wheat is competitively priced compared to international benchmarks, making Australia a key source of grain in the coming year. Global dairy trade prices have dropped significantly in recent auctions but remain high by historic standards. Despite moderate losses, farmgate prices are expected to remain elevated. As for beef, while cattle prices initially eased, they have been on an uptrend. With a wet winter forecast and strong global food inflation, the downside risks for cattle prices seem less likely, at least for 2022.

Inflation in Australia has reached its highest level in a decade, prompting the Reserve Bank of Australia (RBA) to raise cash rates with more increases expected. Australian farmgate dairy prices have also reached new highs, and there is optimism for further upside. Oilseed prices, such as rapeseed and canola, have hit record levels, driven by factors like export bans and supply concerns. CBOT corn and cotton have also reached all-time highs. Fertiliser prices, particularly potash, phosphate, and sulphur, have hit new highs, while urea and ammonia prices weakened. Record container congestion outside Chinese ports due to Covid-19 lockdowns has raised concerns about higher container freight costs. Looking ahead, questions arise regarding Australian grain prices following global market increases, the continuation of record dairy prices, the future trajectory of fertiliser prices, and the number of RBA interest rate hikes. On the global scale, food price inflation has surged, with the FAO Food Price Index reaching its highest level since 1990. The war in Ukraine continues to impact grain and oilseed markets, driving prices higher. However, weather conditions and supply projections for wheat remain uncertain. In the dairy sector, mixed global commodity prices have been observed, with weaker demand affecting some products. Palm oil exports from Indonesia have been banned, contributing to elevated vegetable oil prices. In the beef industry, a decline in prices is expected due to factors like increased cow liquidation in the US, but overall food inflation in Australia has risen. Consumers may face higher prices, and innovation will play a role in improving consumer value. Globally, households are grappling with higher food costs and cost-of-living pressures. Fertiliser markets continue to be volatile due to the war in Ukraine and sanctions on Belarus and Russia. Potash and phosphate prices have risen, while urea prices experienced a temporary decline. The flow of fertilisers from Russia and Belarus has been impacted by geopolitical factors. Gas supply disruptions from Russia could further affect fertiliser production and prices in Europe.

New Zealand's exports were heavily influenced by the global protein shortage and increasing demand from China and the United States. The report indicates that beef prices are likely to remain strong, driven by limited global supply and robust consumer demand. Furthermore, the ongoing challenges related to climate change and environmental sustainability continue to shape the sector, prompting efforts to improve resource efficiency and reduce emissions. New Zealand experienced a favourable season with increased milk production. However, the report emphasizes the need for careful management due to potential challenges such as rising input costs and the volatility of global dairy markets. Market conditions remained positive, with strong demand from Asia and emerging markets. Additionally, the report highlights the growing focus on sustainability and the role of the dairy industry in reducing greenhouse gas emissions. New Zealand's grain industry faced mixed conditions during the period. Wheat production was negatively affected by dry weather conditions, leading to lower yields. In contrast, barley and maize production showed more favourable results due to increased demand for feed and alternative grain-based products. The report also emphasizes the importance of diversification in the grain sector, including exploring opportunities in niche markets and value-added products to mitigate market volatility.