03 October 2023
After three years of favourable wet conditions due to La Niña, herd and flock sizes have swelled in the Australian livestock industry. Meat and Livestock Australia reports that this year's breeding ewe numbers have soared to 78.5 million, the highest level since 2007, up from 46.14 million.
However, this apparent prosperity masks a complex and unbalanced situation driven by an unusual combination of market forces. The current meat market is in a state of flux, influenced by various factors. Farmers, concerned about an impending dry season, are downsizing their stock numbers, and selling their livestock. Simultaneously, consumer demand has been tempered, and in recent times some meat processors have been slowed by production constraints.
These factors have led to a significant downturn in sale yard prices for livestock. The changing weather pattern toward El Niño has sounded warning bells, and farmers will now tighten their belts, especially regarding feed and other input costs. Farmers are no strangers to the cyclical nature of their industry and are preparing for the cycle of extreme seasons.
Producers need to closely look at their budgets, potentially offload unproductive livestock, and accumulate feed where possible. Some farmers may have the option of diversification, a prudent approach to enhance resilience and long-term planning.
What policymakers and government must comprehend is that the livestock industry is facing an unprecedented alignment of negative forces—a dry season coupled with rising operating costs and a premature market downturn.
Local shipping costs continue to weigh heavily on Tasmanian producers across Bass Strait and this is especially a hot topic for those located on the islands, an issue which TFGA is working on currently with key government and industry stakeholders to address.
The cost of capital has also surged in recent times as banks adhere to stringent financial probity rules due to regulatory requirements and risk aversion. Other farm input cost increases have stabilised recently, fertilizers, herbicides, and labour remain high, but fuel costs may continue to spike.
While sale yard prices fall significantly, consumers are not seeing this passed on at the supermarket, partly due to the increased overhead costs in the processing and supply chain. As supermarkets announce billion-dollar profits, they should eventually be able to pass on some savings to consumers and potentially alleviate inflation, considering that food prices are a significant component.
Despite the challenges ahead, the Australian livestock industry has witnessed several prosperous years. Many producers will have stockpiled feed, invested in water infrastructure and reserved some cash all of which will serve as a lifeline during a dry season.
The Australian livestock industry finds itself at a crossroads, facing a severe set of challenges. The resilience and adaptability of farmers, coupled with supportive policies and market cooperation, will be pivotal in ensuring the continued success of this sector. Weathering this dry together is not just a matter of economic stability but also of securing our nation's food security for the future.