Ag Industry, Forecasts

ANZ outlook shows optimism for some sectors

Early signs of optimism for grain growers and cattle producers, while sheep meat and wool prices seem volatile, according to a report released by ANZ

ANZ’s autumn edition of the Agri InFocus Report has made forecasts for key sectors in the industry including the prices of sheep, wool and cattle, as well as dairy production and grain crops.

Sheep Prices

The Agri InFocus Report says lamb and mutton prices have remained volatile in the first three months of the year, despite trading well above the lows experienced in the spring of 2023.

Higher than expected prices were short lived, as heavy supply in February pressured the market, ANZ says. Both lamb and mutton indicators reduced by 15 and 25 per cent respectively, from the January peak.

ANZ agribusiness associate director Alanna Barrett says 2023 was record breaking for the Australian processing sector and 2024 numbers are already looking promising.

“2024 lamb slaughter remains well above 2023 levels, which given the volume of lambs processed last year, is particularly significant.

“Last year was record breaking for the Australian processing sector, with the total number of lambs processed in Australia just shy of 25 million head, up around 16 per cent from 2022.

“This leads many in the industry to query winter supply this year, whether there will be a tightening and corresponding price peak prior to new season lamb hitting the market,” she says.

Wool Prices

Prices of fine micron wools have eased, with eroding premiums through the 2023/2024 season, the report says.

Producers of 17-micron wools can expect a premium of just above a 300 cents per kilogram over 21-micron wool, a stark decline from the 800 cents per kilogram premium they were receiving this time last year.

ANZ says in the last six months, broader categories of 19-micron wool have seen lower premiums compared to 21-micron counterparts, down from around 200 cent per kilogram this time last year.

“A decline in demand for finished quality wool products across the Northern Hemisphere has caused the erosion of the premium for fine micron wool,” Barrett says.

Meat and Livestock Australia (MLA) recently conducted a survey which revealed 49 per cent of producers are concerned about a lack of access to skilled labour, including shearers.

This, combined with a lack of price incentive, may lead to uncertainty about the direction of the ewe base in Australia, Barrett says.

Cattle Prices

Steady improvements in cattle prices since late last year can be attributed to improving confidence over the weather outlook as the season has progressed, according to the Agri InFocus Report.

Higher numbers of cattle for sale at auction, which have stemmed from the larger national herd, have added to industry confidence, ANZ says.

“While saleyard prices continue to fluctuate, the general improvement in sentiment has come primarily from farmers’ realisation that the season has held up better than expected,” ANZ head of agribusiness Mark Bennet says.

“While the summer period saw national yardings down slightly on the September quarter, yardings are up 20 per cent year on year, indicating a strong start to beef sales for the year.”

MLA predicts domestic consumption of beef through 2023/2024 will decline to 20.8kg per person, with consumption forecast to continue to decline over the next five years.

Due to this, Bennet says the export market will continue to grow in importance to the domestic industry.

Grain Crops

The report states there are early signs of optimism for the grain and oilseed supply chain ahead of the 2024/2025 harvest.

A combination of good summer rainfall across cropping regions and a La Niña forecast for 2024 could set the scene for a good winter crop.

“The most recent 2023/24 national harvest, including all grains, oilseeds and pulses, is set to be the sixth largest ever recorded, despite being around 30 per cent lower than the previous year,” ANZ head of food, beverage and agribusiness insights Michael Whitehead says.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has forecast a rise of approximately 9 per cent in national crop volumes, based on overall trend growth in the past three decades.

All of this said, global factors including a rise in Russian wheat production – and, the report said, “the fact that Russia appears to be pricing its wheat lower than its competitors” – is putting downward pressure on global grain prices.

Dairy Production

Whitehead says the dairy industry is continuing to go through a period of structural change, which may see milk production fall to a 30 year low within the next two years.

Production has not fallen below 8 billion litres since 1992, but ANZ says there has been a downward trend in the last decade.

“Many Australian farmers are choosing to leave the dairy industry, with many making the shift to beef or sheep production,” Whitehead says.

With this trend becoming common and the national milking herd shrinking, ANZ expects output to keep falling.

“The big query for many across the entire dairy supply chain, is when the industry is likely to see production levels finally plateau.

“The Australian dairy industry remains an innovative sector with great opportunities, and as we have seen from other agri sectors, this phase of the cycle will even out at some point. The question is, when.”

Send this to a friend