Overview of the Year
The Australian cattle industry in 2023 has been characterised by significant change, fluctuating confidence, and the cyclical nature of the herd. Compared to the high-price period of 2020–2022, this year has seen a notable shift, with market performance heavily influenced by confidence and sentiment amidst typical supply and demand dynamics.
Market Changes and Price Dynamics
The market in 2023 moved more rapidly and significantly than in recent history. At its lowest in mid-October, prices were 58%–70% lower than the previous year and 32% to 52% lower than the 10-year averages.
This decline was driven by several factors, including supply, weak buying demand, higher stock numbers on farms, and notably, a swift change in producer confidence. The shift in confidence this year has been unprecedented, with better seasonal conditions compared to the severe drought of 2019. Despite this, the decline in prices was primarily driven by a loss of confidence.
Confidence as a Key Driver
Market and producer confidence, often influenced by weather conditions or forecasts, plays a crucial role in determining market prices and demand. The last two years saw high confidence levels due to favourable weather, driving the market to record highs.
However, early discussions and media attention on El Niño in 2023, despite its official declaration only in September, created negative sentiment. This sentiment, coupled with drying weather and a dry outlook, eroded buyer confidence, leading to weakened demand and a significant price drop.
The Cyclical Nature of Cattle Production
Cattle production is inherently long-term, often spanning over two years from genetic selection to turn-off. This long-term perspective means that the industry is accustomed to cyclical changes influenced by weather patterns and global dynamics.
Despite the challenges faced in 2023, the industry’s resilience and ability to adapt remain strong. Key factors supporting the industry include changing herd dynamics in the United States, a growing global middle class demanding quality beef, and a resilient domestic consumer base.
Recent rainfall has already begun to shift market sentiment, indicating a recovery from the lows experienced in October.
Looking Forward to 2024
Despite the challenges of 2023, the outlook for the Australian cattle sector remains positive. Factors such as recent rainfall, falling retail prices, strong exports, and rising processor throughput contribute to this optimistic outlook. Monitoring the United States market dynamics will be crucial in supporting feeder and finished cattle prices as their production volumes decrease.
Domestically, investments in genetics, infrastructure, and on-farm management over the past three years are expected to yield dividends, enhancing herd performance even under challenging conditions. The sector is poised for an exciting year in 2024, with solid fundamentals underpinning a positive outlook.
