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Global dairy commodity markets experienced a significant shift compared to the previous year. In 2022, limited supplies and high demand had driven dairy commodity prices to record or near-record highs, influenced by factors such as Chinese import demand and supply chain issues. However, the situation has changed with a return to growth in milk supply across most export regions, sluggish Chinese import volumes, and demand rationing in various dairy markets due to inflation and higher prices. As a result, whole milk powder and skim milk powder prices have dropped by 30% to 40% since the peak in 2022, reaching or falling below the average price of the past five years. The decline in dairy commodity prices has impacted milk prices in export regions, particularly in New Zealand, which often leads the price cycles. Dairy farm businesses, which enjoyed near-record or record prices in 2022, are now facing lower farmgate milk prices in 2023, aligning with global commodity market trends. The near-term outlook for the global dairy market suggests continued stress due to increasing milk production in export regions and subdued Chinese interest in the second half of 2023. However, there are optimistic signs of commodity prices bouncing along the bottom, and it is expected that meaningful Chinese purchases, along with improved demand from other regions, will lift global markets later in 2023. China's dairy market is undergoing a rebalance, with slowing production growth, signs of recovery in demand, and the depletion of local inventories. China's aim to achieve 41 million tonnes of milk production by 2025 is anticipated to be reached in 2023, resulting in a slowdown in the country's appetite for dairy cattle imports. The export market for dairy cattle to China will undergo a significant change in 2023, as New Zealand has ceased sea freight exports, impacting Chinese buyers. The forecast for the upcoming season suggests an opening farmgate milk price of around NZD 8.20/kgMS. However, margin pressure will continue to be a challenge for dairy farmers, especially considering the potential uncertainties brought about by global economic integration and geopolitical shifts. While three scenarios are outlined, including a global recession, central bank policies, and conflicts with China, their specific outcomes cannot be predicted. These scenarios may have varying impacts on dairy demand, commodity prices, and global trade, urging New Zealand dairy producers to consider the changing dynamics, reassess trade relationships, and diversify their product mix and customers in response to the evolving global trade architecture.

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.

Over the coming three months, the beef market in New Zealand is expected to face some challenges. Normal or above-normal rainfall is likely in the north and west of both islands, while the east coast of the North Island may receive normal rainfall levels. Soil moisture levels are predicted to be near normal for the east coasts but below-normal for other parts of the country. Despite this, the beef industry has been resilient, with strong export volumes to China and the US. However, the ongoing revitalization plan in China and the slowing US economy could impact future beef imports. Farmgate beef prices have remained firm, supported by demand tension between the two key markets. New Zealand's dairy industry is experiencing a rebound in milk supplies after a wet summer and weaker comparables from last year. Milk production in March 2023 increased by 0.3% compared to the previous year, and national milk production for the 2022/23 season is down 6.2% compared to the previous season. However, there is a major change coming for dairy cattle exports into China, as New Zealand live dairy exports by sea freight will cease, impacting Chinese buyers. Opening farmgate milk price forecasts for the 2023/24 season are eagerly anticipated, and while global supply and demand fundamentals are weaker, increased import demand from China and the US in March has provided some optimism for the dairy industry. The global commodity markets, including grains, saw a softening trend in March but showed signs of optimism by the end of April. In New Zealand, the grain market is affected by factors such as oil production cuts, changes in China's fertiliser export quota, and a rebound in US demand. The phosphate and potash markets have been sustaining similar fundamentals, with global supply exceeding demand. Urea prices experienced volatility, with the US market showing increased buying and shipments due to corn planting ahead of schedule. The non-official increase in China's fertiliser export quota scheme could further impact global supply. Overall, the landing track for farm input prices is uncertain, and various factors need to play out before a new price level is established.

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.