Meat & Livestock News

Impact of Australian Drought on New Zealand’s Livestock Trade: A 2023 Analysis

Arid mud landscape, broken tree sunset season

Shift in Australian Livestock Dynamics

The year 2023 marked a significant change in Australia’s agricultural landscape. After enjoying favourable weather for several years, the country faced a dry spell in its third quarter, leading to a notable shift in livestock numbers.

Australian farmers, adapting to these arid conditions, reduced their herds and flocks considerably. This reduction resulted in an increased supply of sheep meat and beef in New Zealand’s primary markets during the latter half of the 2022-23 season, a trend expected to persist into the 2023-24 season.

In the first 11 months of 2023, Australia saw a 7% increase in lamb and sheep processing and a significant 16% rise in cattle processing compared to 2022. Consequently, Australia exported an additional 84,000 tonnes of sheepmeat and 173,000 tonnes of beef compared to the same period in 2022.

Market Dynamics and Price Fluctuations

This influx of livestock products from Australia coincided with a period of weakened demand, particularly in China. This imbalance led to a downturn in prices for prime livestock in New Zealand, especially affecting lambs and sheep.

Current prices for mutton and lamb are 45% and 15% below the five-year average, respectively. In contrast, beef prices have shown relative stability, being only 1% below the five-year average.

New Zealand’s Livestock Market Response

Despite the increase in Australian beef supply, drought conditions in other major beef-producing nations like the US and Canada have led to a reduction in their exports. However, global demand for imports remains robust.

This scenario, combined with rising on-farm costs, has led to a projection of significantly diminished profits for New Zealand farmers, with many facing potential operational losses.

Despite these market pressures, New Zealand’s livestock sector has experienced a comparatively milder impact than Australia. In specific markets, such as the US and UK, New Zealand has successfully differentiated its products, leveraging the preference for smaller meat cuts.

Future Outlook

The future trajectory of international livestock markets will hinge on the duration and intensity of Australia’s dry conditions and the recovery rate of China’s economy and consumer demand.

Insights into potential market improvements in China are anticipated to emerge with the onset of pre-order sales for the Chinese New Year, offering a glimpse into market trends by mid-December.

The drought in Australia has had a profound impact on New Zealand’s livestock markets, influencing prices and challenging the profitability of local farmers. The full scope and longer-term implications of these shifts are expected to unfold in the coming months.