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Record high North Island bull pricing and constrained global beef supply are supporting very high export pricing and demand. However, processing challenges and Covid-related lockdowns in China are limiting volumes available for export. Congestion and processor backlogs are anticipated for the remainder of the season. RaboResearch expects farmgate beef pricing to remain elevated through April but slowed economic growth and potential further lockdowns in China pose a risk to consumer demand. Milk supplies in key export regions, including New Zealand, Oceania, and Australia, have sharply declined. New Zealand milk production was down by 8.2% year-on-year in February 2022. Rising costs, labour shortages, unfavourable weather, and variable feed quality and prices continue to limit production. Farmgate milk prices have followed commodity prices higher worldwide, but the production response by producers is constrained. New Zealand milk production is likely to end the season lower than the previous year due to dry conditions in Southland and Waikato. The war in Ukraine and subsequent sanctions are impacting global grain trade. Russia, a major exporter of grains, has ceased exports, causing potential disruptions and reallocating products to alternative markets. The high prices and supply challenges are expected to continue throughout the winter and spring, with significant impacts on the supply of fertilisers. China's strict zero-Covid-tolerance measures are also affecting the domestic consumption and manufacturing output, which could further impact the grain trade.

Russia's invasion of Ukraine has had a significant impact on agricultural commodity markets worldwide. The invasion has disrupted old commodity trading routes and caused substantial increases in prices and volatility, particularly in the beef, dairy, and grain sectors. The uncertainty surrounding Ukraine's agricultural production has contributed to these market fluctuations. While western sanctions do not extend to Russian agricultural products, the global agricultural community is bracing for potential disruptions. In terms of beef, the rising input prices, such as fertilizers and diesel, have become a mounting concern for 2022. The ongoing La Nina event has brought destructive storms to certain regions in Australia, affecting beef-producing areas like Queensland and New South Wales. The fluctuating weather conditions have created a divide between wetter and drier regions, with some southern regions in need of more rain for the upcoming winter cropping season. Despite the challenges, high beef prices have offset some of the pressures faced by producers. The grain market has experienced significant impacts due to the Russian-Ukrainian conflict. With Russia and Ukraine being major global exporters of wheat, the disruption has caused high volatility and substantial rallies in global wheat prices. Although Australian grains remain under-priced compared to global benchmarks due to ample domestic supply and shipping limitations, the market is highly uncertain. Factors such as the extent of Ukraine's crop at risk, overseas growing conditions, and the US drought situation contribute to potential upside risks in the coming months. In the dairy sector, global dairy trade auctions have achieved record-breaking results, leading to high farmgate prices. The Russian invasion of Ukraine further adds to the volatility in grain markets, which indirectly affects the dairy industry. The situation poses both challenges and opportunities for dairy producers, as the ongoing market dynamics and global results could continue to impact farmgate prices. However, the high prices experienced in recent years may have peaked, and the industry could see a slight decline in prices. The agricultural commodity markets, particularly beef, dairy, and grains, are facing significant disruptions and uncertainties due to Russia's invasion of Ukraine. The conflict has re-established old commodity trading routes and caused price increases, volatility, and concerns over production. Producers are closely monitoring input prices, weather conditions, and global market trends to navigate these challenging times.

The ongoing conflict in Ukraine and Russia is expected to have minimal direct impact on global beef trade. Russia's role in global beef imports has significantly declined in recent years, accounting for only 2% in 2020. However, there may be indirect impacts such as higher costs for feed and energy. Cattle prices in Australia have been relatively stable, but there is a shortage of finished cattle. Slaughter numbers in 2021 were the lowest in 37 years, indicating a rebuilding of the herd. Beef exports from Australia have decreased, with volumes in January 2022 being the lowest since 2011. The milk supply situation in key export regions, such as the US and New Zealand, has been deteriorating. Poor weather in New Zealand and feed pressures in the US have led to a decline in milk production. As a result, Oceania commodity prices, including butter and cheese, have reached record levels. This firm commodity basket is expected to support milk pricing in Australia, and further upside in pricing is anticipated. Higher feed and fertiliser prices, along with increased energy costs, may limit milk supply growth and impact discretionary dairy purchases in emerging markets. Ukraine is a major export powerhouse for grains, oilseeds, fertilisers, and energy. The ongoing conflict and export disruptions in Ukraine have led to a halt in exports, which increases demand for grains from other regions, including Australia. Price volatility is expected to remain high, and the impact on 2022 crop production in Ukraine is unknown. The conflict has also led to heavy sanctions on Russia, which could disrupt Russian exports of grains, energy, and fertilisers. While a direct ban on Russian grain and oilseed exports is unlikely, indirect disruptions are occurring. The length of the war and the extent of the disruptions will be crucial to monitor.

Global beef supplies are expected to remain constrained in 2022 due to production rebalancing in key export countries. The US is experiencing a reduction in feedlot cattle slaughter, while Brazil and Argentina anticipate a slight increase in production. New Zealand beef production is expected to decline following a temporary increase in 2021. Consumer demand for beef is projected to remain high, particularly from China and the US. However, processing and supply chain challenges, high beef prices, weaker economic conditions, and currency fluctuations pose risks to pricing. Global dairy commodity prices have risen, driven by restricted milk supply in the EU, US, and New Zealand. New Zealand farmers have reached record milk prices for the 2021/22 season. Despite inflationary pressures and higher input costs, the profitability of dairy farmers is expected to be favourable. Changes to Fonterra's capital structure have been approved, which may further support dairy demand. China remains a significant determinant of elevated powder prices, although economic uncertainties, government shifts, and power shortages pose downside risks. Global fertiliser prices, including urea and phosphate, are expected to remain relatively high. Corn, soybeans, and wheat prices are also projected to stay elevated, supporting demand for fertilisers. Supply of phosphate is expected to remain tight due to China's export restrictions. The Ukrainian and Russian crisis poses an upside risk to fertiliser prices. The New Zealand dollar is expected to maintain its strength, supported by healthy global commodity demand and the Reserve Bank of New Zealand's rate increases. Supply chain challenges and labour availability remain key risks.

China relaxes customs access for Aussie imported beef: Is it a sign of a thaw in relations?

The La Nina weather event, which has been ongoing since November, has brought monsoonal conditions to Victoria, South Australia, and New South Wales, while central Queensland has experienced drier-than-average conditions. Despite the mixed weather patterns, livestock prices remain strong, supported by the overall wetter-than-average seasonal conditions. The Australian beef industry has benefited from these factors, with hot livestock prices remaining stable. The global dairy trade has been positive in all three auctions held so far this year, with export prices reaching their highest levels in the last decade. Australian dairy producers are experiencing the benefits of these strong export prices, providing good news for the industry. The summer harvest in the eastern states has been generally excellent, and despite challenges during the La Nina event, soil moisture levels are expected to remain high, supporting a good start to the 2022-23 season. Grain prices have been generally strong, although they have pulled back slightly in the new year. Wheat futures on the ASX have remained elevated, reflecting high global fertiliser prices, geopolitical uncertainty in Ukraine, and patchy global growing conditions. Canola prices have decreased significantly from their earlier peak, and barley prices remain low due to the China trade ban and abundant domestic supply. Cotton prices have rallied, reaching the highest levels in 11 years, supported by excellent seasonal conditions. The sugar market has peaked but has only experienced moderate declines since November.

The Australian beef industry is expected to see a lift in production and exports in 2022, driven by increased cattle numbers. Slaughter numbers are forecasted to increase by 13% compared to the previous year, indicating improved breeding and calving numbers. Despite the increase in supply, cattle prices are expected to remain strong due to strong consumer demand and limited supplies. The US meat market experienced high demand in 2021, resulting in high import and export prices. While demand in the US is expected to remain strong, any downward movement may create margin pressure for Australia and lead to downward pressure on prices. The Australian dairy industry is in a strong position, with widespread profitability and expected record-breaking EBIT margins for the third consecutive season. Farmgate milk prices in the southern export region may see upside as global market fundamentals remain price supportive. However, rising production costs may partially offset the potential increase in farmgate milk prices. Milk production underperformed in the previous season due to labour shortages and above-average rainfall. Labour challenges are expected to continue in the upcoming season, but most dairy farms have sufficient feed reserves to mitigate climate risks. Grain production in Australia had a strong year in 2021, with record harvests in both the west and east coasts. However, heavy rainfall during the harvest window in November and December caused flooding and impacted crop quality and quantity. Global grain prices are expected to remain high due to low stocks, La Niña risks, demand from China's feed sector, and elevated input costs. Prices for wheat, corn, and barley are forecasted to remain above average. While some improvements in global supply are expected, factors like export quotas, taxes, and geopolitical tensions may limit shipments and impact prices.

The dairy market is experiencing soaring prices due to restricted global milk supply, with the EU, US, and New Zealand all facing tight supply situations. Farmers in New Zealand are expected to have a profitable 2021/22 season with record milk prices, although some may not achieve record profitability due to higher cost structures. Changes to Fonterra's capital structure are also anticipated. In the beef market, global supplies are expected to remain constrained in 2022, with reduced production in the US due to drought and tight profit margins. Consumer demand for beef is expected to remain elevated, particularly from China. The global pandemic continues to impact food markets and supply chains, leading to transitory supply chain costs, inflationary pressures, and changes in consumer purchasing behaviour. The Chinese market is experiencing strict lockdown policies and economic uncertainties, which may affect food markets. E-commerce in the food system has seen significant growth. In the urea and grain markets, global urea prices are expected to decline over the next six months, although local prices in New Zealand will likely remain higher than in 2021. Global prices of corn, soybeans, and wheat are expected to stay relatively high. La Nina weather conditions intensified in December 2021 and are expected to continue affecting New Zealand's climate in the first quarter of 2022. Higher temperatures, warm nights, and high humidity are forecasted, along with near-normal rainfall in the east and potential cloud cover in other areas. Soil moisture levels are expected to be near normal in some regions but below normal in others. Hotspot regions with soil moisture deficits have been identified, which may be relieved by tropical cyclone activity, but this also brings the risk of heavy rainfall and flooding.

The Bureau of Meteorology (BOM) has increased the likelihood of La Niña conditions re-emerging, which will bring above-average rainfall to northern and eastern Australia during summer. This increased rainfall is beneficial for southern regions, supporting grain fill and pasture growth. However, it hampers harvesting in northern productive regions, affecting the winter crop. Beef prices have been rising, but there are concerns about price pressure as global prices stabilize and the Australian dollar strengthens. Dairy commodity prices are being supported by supply pressures, with slow milk production in New Zealand and Australia. New Zealand experienced a slow start to its season, and Australian milk production is down. Despite challenges in supply chains and rising costs, there is ongoing demand for dairy products in Southeast Asia, particularly from China. The Chinese foodservice sector is still recovering from the impact of the Delta variant, affecting consumer spending and travel. Rabobank forecasts a 5% decrease in Australian winter crop production compared to the previous season, but it remains 25% above the five-year average. Global wheat and corn prices have been rising, driven by positive demand signals and reduced stocks. Fertilizer supply concerns, particularly in China, pose challenges for phosphate and nitrogen availability. High global grain prices are expected to continue, while urea prices may fall depending on factors such as gas supply and commodity prices.

In September, beef prices experienced modest gains along with other commodities like lamb, wheat, and sorghum. The overall exuberant pricing complex led to a 1.5% increase in the agricultural index for the month. However, the decline in barley, sugar, and wool prices was limited to below 1.5% due to the softening of the Australian dollar. Despite some fluctuations, beef prices remained strong, and ongoing demand, coupled with above-average rainfall forecasted for eastern Australia, supported continued high cattle prices. Global milk prices saw an upward trend in September, driven by a slowdown in milk production in key regions and strong import demand from Asian buyers. While milk production in the United States and Europe experienced some setbacks, Australia's milk production for the 2021/22 season started sluggishly due to wetter-than-normal conditions impacting pasture growth. However, a weaker Australian dollar against the US dollar provided favourable export returns for the dairy industry. The market outlook suggests a slow crawl to recovery for Australia's food market, with a focus on a gradual economic bounce back. Global commodity prices, including grains, showed mixed performance in September. CBOT wheat prices increased, while CBOT corn remained flat, and CBOT soybeans declined. Locally, wheat prices were projected to remain supported by a tight global market, especially for high protein wheat. Canola prices reached new highs due to a global shortage, but a resupply and lower prices were anticipated for the next season. Concerns about Chinese policies, electricity shortages, and limits on fertiliser exports from China added pressure to the supply of agricultural inputs, impacting Australian farmers' preparations for the upcoming season.