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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.

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 weather forecast predicts wild weather in New Zealand, including an increase in tropical cyclones, which could bring more rain and strong winds to certain regions. This could lead to higher humidity and animal health risks for livestock farmers, including fly strike, worm burden, and facial eczema. Additionally, global beef prices are expected to be influenced by tightening supplies and weakening consumer demand. While beef production is expected to increase in Australia and Brazil, US production is forecasted to decline, resulting in tight global beef availability. New Zealand may see a lift in US import demand for beef towards the end of 2023 and into 2024. New Zealand's dairy industry is experiencing improved milk supplies at the beginning of 2023, with better grass growth compared to the previous year. However, farmgate milk price forecasts have faced downward pressure, and commodity prices have been losing momentum since mid-2022. Chinese importers are more cautious with purchases, and there is demand rationing in all markets. While the start of the new season may see some improved pricing, farmgate milk price forecasts are likely to be less optimistic than the previous season. The supply and demand balance for fertilisers have been shifting, impacting grain production. The fertilisers market experienced hikes due to COVID-related disruptions and geopolitical tensions, but with increasing stocks and reduced international prices, the outlook for 2023 is more favourable. However, the ongoing war between Ukraine and Russia and energy crisis may affect fertilizer application rates and overall grain production. The Baltic Panamax index, a proxy for grain bulk freight, has declined, mainly due to soft Chinese demand and Brazilian rainfall. There may be a soft rebound in the grain market in the second quarter of 2023 as temporary challenges resolve.

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.

The spring outlook for beef demand and farmgate pricing in New Zealand is positive, with tight global beef supplies and strong demand from China and the US. The AgriHQ North Island bull price has increased, and farmers can make trading decisions with confidence. However, labour shortages and processing challenges have led to lower beef export volumes, and the US cow herd liquidation is affecting demand for New Zealand lean trimmings. Overall, the beef market is expected to remain elevated, but cost headwinds and production risks should be considered. Commodity prices for dairy products have continued to decline, influenced by inflation concerns, recession fears, and doubts about global economic growth. Milk production in New Zealand has decreased, impacted by a dry autumn period in Waikato and fickle weather conditions. Global milk production is also struggling, with sluggish growth in the EU due to adverse seasonal conditions and feed shortages. The Chinese dairy market remains uncertain, with restrictions and economic softening. Despite these challenges, dairy prices are supported by elevated prices in export regions and strong demand from China and the US. Russian fertiliser exports, including potash, are expected to remain strong despite a slight decrease year-on-year. Phosphate prices are projected to trend down due to larger supplies in North and South America. Agrochemical prices in China have already declined due to production capacity expansion, although energy shortages may slow the rate of decline. Oil markets globally remain tight, and crude oil prices have been affected by economic outlook and demand factors. Ocean container and bulk shipping rates are experiencing fluctuations due to global economic conditions and supply chain issues.

New Zealand's beef exports faced a decline in demand from the US market due to lower US demand caused by the liquidation of the US cow herd and ample supplies of 90CL cow. However, exports to China remained strong, surpassing the five-year average export volume. Despite the challenges, farmgate pricing for beef remained elevated, supported by tight global beef supplies and a favourable exchange rate. New Zealand's dairy industry experienced a decline in exports to China, with a 30% YoY decrease in the first half of the year. The reduction was attributed to weaker Chinese demand due to COVID-related lockdowns and increased local milk production. However, milk production in New Zealand remained steady, with a slight increase in June compared to the previous year. Despite the export challenges, farmgate pricing for dairy products remained elevated. Global urea markets experienced falling prices, reaching 11-month lows in July. However, signs indicate that supply and demand issues will push prices higher in the coming months. The global container rate index declined, but rates are expected to normalize over the next 12 months, remaining higher than pre-pandemic levels due to various factors such as imbalanced trade flows and increased operational costs. The Baltic Panamax index, representing grain bulk freight, continued to decrease, and the resumption of grain exports from Russia and Ukraine via the Black Sea remained uncertain.

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.

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.

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.

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.