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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.

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Australian agricultural commodity prices have experienced a downward trend, with the NAB Rural Commodities Index falling 6.6% in December and an additional 5.8% in January. Beef and grain prices have been major contributors to this decline, with wheat dropping significantly in late 2022 and cattle prices continuing to fall. Looking ahead, grain prices are expected to remain moderately lower, and the livestock sector, particularly cattle, faces challenges such as higher turnoff, processor constraints, and difficult global conditions. In the dairy sector, global dairy trade auction results have been negative, posing challenges for Australian processors due to high farmgate prices. However, returns at the pre-farmgate level remain strong for now. Cotton prices have stabilized in the new year, while sugar prices have shown moderate gains. The oil market outlook and supply concerns are expected to drive prices in the coming months, with prices likely to remain elevated. The global economic outlook remains uncertain, although recent data have surprised on the upside. Inflationary pressures persist, leading to a more hawkish stance by the Reserve Bank of Australia (RBA). NAB predicts 25 basis point rate hikes at each of the next three RBA meetings, with rates peaking at 4.1% in May. Despite some positive economic indicators, the Australian economy is expected to grow below trend in 2023 and 2024, leading to slower consumption growth and weaker outlook for investment in housing and businesses. The unemployment rate is also projected to drift higher in the second half of 2023. Weather conditions in Australia have been mixed, with above-average rainfall in northern regions but a drier start in southeast Queensland, southwest Western Australia, Victoria, and Tasmania. The possibility of an El Nino developing this winter adds to the uncertainty, although the Bureau of Meteorology's latest outlook suggests a dry autumn for southern Australia. Farm input prices have been volatile due to various factors, including COVID-19, trade disruptions, the Ukraine war, and inflationary pressures. Fertilizer prices have been declining, while feed grain prices have retreated but remain above year-ago levels. Cattle prices are undergoing a sharp correction, dairy trade auction results are reversing, and wheat prices are expected to gradually ease with a higher Australian dollar forecast.

Australian agriculture had a remarkable year in 2022, with high commodity prices and strong production volumes. Beef, dairy, and grain sectors all experienced excellent to record prices, benefiting from favourable seasonal conditions and global market tightness. Despite challenges such as price volatility, supply chain issues, and elevated costs, Australian farmers achieved record-high farm income. However, it is unlikely that 2023 will replicate the exceptional performance of 2022, with lower prices expected due to a global recession and inflationary pressures. In the beef sector, production volumes are slowly recovering, and while cattle prices will be softer in 2023 compared to 2022, they will remain historically high. Import demand from China and the contraction of US beef production will play a crucial role in determining market dynamics. The dairy sector also anticipates positive margins in the 2023/24 season, with ample feed availability and favourable seasonal conditions. However, ongoing recovery from flooding remains a challenge. The grain market is facing a shift in supply and demand dynamics, with historically low global stocks and increased political involvement in the trade. While the west coast of Australia expects increased demand for canola, the rest of the year appears less exciting. Grain prices are projected to ease, with a divergence between wheat and corn markets. Reduced supplies from the Black Sea region, lower Australian crop yields, and dry conditions in Russia may contribute to rising wheat prices. In contrast, corn prices are expected to decline due to large supplies from Brazil and the US. Australian agriculture is well-positioned to navigate 2023, but with lower margins compared to the exceptional year of 2022. Climate extremes, inflation, geopolitics, and supply chain disruptions are among the challenges that farmers need to address. Adapting to changing consumer behaviour and improving sustainability practices are also key priorities for the industry. While uncertainties remain, the sector remains resilient and ready to seize opportunities in the coming years.

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Australian cattle markets have experienced a recent decline in prices due to an abundance of young cattle supply and challenging conditions in the US market. Although prices have reversed in the past week, there are potential risks for further volatility in 2023. Despite this, overall beef prices remain above pre-2020 levels, indicating a profitable period for many producers. Global dairy trade auctions have shown a downward trend, posing challenges for Australian processors who are dealing with falling milkflow and high farmgate prices. While farmgate prices currently remain high, there are emerging downside risks for the 2023-24 season. However, it should be noted that the current disconnect between falling global prices and high farmgate prices is not expected to continue indefinitely. Australian wheat prices have significantly declined since mid-November, primarily due to easing concerns about Black Sea supply, a stronger Australian dollar, and a large domestic harvest. However, volatility is expected to persist due to tight global stocks and geopolitical concerns. Despite this, Australian domestic feedgrain prices remain higher than the previous year, and there is an ample supply of feed-grade grain in the Australian market for 2023. ABARES forecasts record-breaking wheat production, surpassing last year's record, along with substantial production numbers for barley and canola.

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