Alistair Read, Jasmine Rollan and Yilei Ma
- Value of production for livestock and livestock products to fall by 12% to $31.9 billion in 2023–24.
- Prices of livestock and most livestock products forecast to fall.
- Domestic production volumes for livestock to rise as drier seasonal conditions increase turn-off rates.
- The value of livestock and livestock product exports to fall by 1% to $27.7 billion in 2023–24.
- Rising global supply of meat and livestock products is expected to outweigh improved global demand.
The gross value of production for livestock and livestock products is forecast to fall to $31.9 billion in 2023–24, down by 12% from an estimated $36.1 billion in 2022–23 (Figure 1.1). The forecast fall in production values reflects lower prices across most livestock and livestock product categories more than offsetting higher levels of production.
The forecast fall in the gross value of production is driven by beef, veal and live cattle (down 20% to $12.1 billion) as well as sheep meat and live sheep (down 19% to $3.7 billion). Lower production values are also forecast for milk (down 3% to $5.9 billion) and wool (down 7% to $2.9 billion). However, the production value of pork and poultry meat is expected to rise (up 1% to $5.4 billion).
The forecast value of livestock and livestock product production in 2023–24 is $2.1 billion lower than in the September Agricultural Commodities Report. A downwards adjustment to average saleyard prices for livestock – reflecting recent price data – has more than offset a small upwards revision in production.
Figure 1.1 Annual value of livestock production and livestock products
The value of livestock and livestock product exports is forecast to fall to $27.7 billion in 2023–24, down by 1% from $27.8 billion in 2022–23 (Figure 1.2). Export values for most livestock and livestock products are forecast to fall due to lower export prices outweighing higher export volumes. This reflects global supply rising faster than global demand.
The fall in export values is driven by a decrease in sheep meat and live sheep (down 7% to $4.2 billion), wool (down 12% to $3.0 billion), and dairy (down 4% to $3.2 billion). However, the total value of beef, veal and live cattle exports are forecast to rise (up 6% to $12.5 billion) as increased beef production more than offsets a fall in global beef prices.
The forecast value of livestock and livestock product exports in 2023–24 is $1.1 billion higher than in the September Agricultural Commodities Report. This upwards revision has been driven by higher export volumes and relatively strong export prices.
Figure 1.2 Annual value of livestock and livestock product exports
Falling restocker demand and rising turn-off to drive down livestock prices
Average saleyard prices for cattle, sheep, and lambs are forecast to fall in 2023–24 reflecting higher turn-off rates and lower restocker demand (Figure 1.3 & Figure 1.4). The onset of both El Niño and a positive Indian Ocean Dipole (IOD) have led to drier seasonal conditions across Australia (see Seasonal Conditions for more context). These climatic drivers are forecast to cause below average rainfall and above average temperatures across Australia over 2023–24.
In 2023–24, drier conditions are expected to reduce pasture availability and increase supplementary feed prices. This is expected to reduce farm demand for livestock, raise turn-off rates, increase livestock supply in saleyards and lower saleyard prices. For further information on the factors driving the recent decline in livestock prices, see Livestock Prices.
Although there has been some favourable rainfall in drier parts of the country in recent weeks, pasture availability remains below 2022–23 levels, and fodder continues to be in demand from both livestock producers and feedlots. In southern Australia, the availability of good quality pasture remains high, reducing fodder demand. Some of these pastures are being conserved in the form of silage and hay, increasing supply and lowering prices.
The forecast for below average rainfall and above average temperatures will also increase the risk of fires in grazing areas. For example, many fires have occurred across northern Australia over recent months; the loss of paddock feed from fires in extensive rangeland grazing systems is having a localized but severe impact on producers. A widespread outbreak of fires during summer presents a downside risk to the forecast. Fires reduce feed availability and encourage higher livestock turn-off, placing downward pressure on prices.
Average cattle saleyard prices are forecast to fall to 435 cents per kilogram (carcase weight) in 2023–24, down by 34% from 662 cents per kilogram in 2022–23 (Figure 1.3). This price decrease reflects higher cattle supply in saleyards and lower restocker demand. Rising processing capacity and elevated beef export prices are expected to place some upward pressure on average saleyard prices for cattle during the first half of 2024.
Australian beef export prices are also forecast to fall, but remain elevated, as rising global beef supply – particularly from Australia and Brazil – outweighs stronger demand from China and the United States. Beef export prices are forecast to fall by less than the average Australian saleyard price as the growth in global beef supply is forecast to be less than the growth in supply of cattle to Australian saleyards.
Average saleyard prices for both lambs and sheep are forecast to fall in 2023–24 as drier seasonal conditions result in lower restocker demand and increased turn-off rates (Figure 1.4):
- Lamb saleyard prices are forecast to fall to 540 cents per kilogram (carcase weight) in 2023–24, down by 26% from 730 cents per kilogram in 2022–23. Saleyard prices for restocker lambs are expected to fall as drier seasonal conditions reduce restocker demand. A large supply of lambs is also expected due to several years of robust flock growth and strong lambing rates.
- Sheep saleyard prices are forecast to fall to 235 cents per kilogram (carcase weight) in 2023–24, down by 43% from 415 cents per kilogram in 2022–23. The supply of sheep available for slaughter is expected to increase following several years of flock growth. Drier conditions will incentivise farmers to cull older stock and non-performing ewes.
For a more detailed analysis of the factors that are driving the decline in livestock prices, see Livestock Prices.
Figure 1.3 Average annual cattle saleyard price and beef export price
Figure 1.4 Average annual sheep and lamb saleyard price
Domestic pork and poultry prices to decline
Pork prices are expected to decline in 2023–24, reflecting lower demand for pork as it becomes relatively more expensive compared to red meat (beef and sheep meat) (Box 1.1).
Poultry meat prices are expected to decline slightly in 2023–24 as lower red meat prices make poultry meat relatively more expensive. However, demand for poultry meat – predominantly chicken meat – is expected to fall by less than pork. This is because falling disposable incomes in Australia in 2023–24 (see Economic Overview for more context) are expected to support chicken meat demand, which remains a cheaper protein choice than traditionally more expensive red meats.
Pork and poultry meat production are expected to increase slightly in 2023–24 as ongoing productivity improvements more than offset high production costs. Production costs are forecast to remain elevated, reflecting relatively high input prices for feed grains, energy and labour.
Box 1.1 Australian red meat consumption expected to increase in 2023–24, total meat consumption per capita to rise
Meat per capita consumption in Australia is expected to rise in 2023–24 as lower lean meat (pork and poultry) consumption (down by 1%) is more than offset by higher red meat consumption (up by 8%) (Figure 1.5).
The composition of Australian meat consumption per capita has evolved over the past 50 years:
- Per capita meat consumption has shifted away from red meat, replaced by higher lean meat consumption (Figure 1.5). This reflects changing consumer preferences and falling lean meat prices relative to red meat which have increased affordability.
- Although consumption per capita has fallen over the past 5 years, Australia remains one of the largest per capita consumers of meat in the world, according to OECD data. Chicken meat is the most consumed meat in Australia and consumption is expected to remain relatively stable due to its affordability and consumer tastes (Figure 1.5).
Figure 1.5 Annual share of Australian meat consumption per capita by type and total meat consumption per capita
Total meat consumption per capita is forecast to rise in 2023–24. Red meat consumption is forecast to increase as changing relative prices between meat types impacts demand:
- The relative price of red meat, compared to an overall basket of meat products, is forecast to fall in 2023–24 (Figure 1.6, top two panels). Lower relative prices for red meats are expected to drive an increase in consumption per capita.
- The relative price of pork is forecast to rise which incentivises consumers to reduce pork consumption and possibly substitute towards consuming more red meats (Figure 1.6, bottom left panel).
- While the relative price of poultry is expected to rise, this is not expected to impact poultry consumption (Figure 1.6, bottom right panel). Poultry consumption per capita is expected to remain relatively stable, despite higher relative prices, due to its higher affordability and strong consumer preferences.
Figure 1.6 Annual relative price and relative consumption per capita for different meat types
Although red meat consumption is expected to increase in 2023–24 as relative prices shift, it nonetheless is typically more expensive than lean meat. Higher inflation and high interest rates across Australia have increased the cost of living and reduced the spending power of households (Economic Overview). As such, increasingly price conscious consumers may trade down into lower value cuts, such as mince, reduce the amount of product consumed or substitute to lean meat as a source of protein. In particular, lower income households tend to be more sensitive to price and income changes due to a larger share of income going towards food.
Other factors can also influence consumer demand for meat. For example, OECD and FAO research suggests that higher-income consumers can be more responsive to factors such as environmental impacts, animal welfare, traceability, health impacts and quality of meat products. However, current cost-of-living pressures may nonetheless increase the importance of prices in consumer decision-making, even for these higher income households.
Farmgate milk price to fall but remain relatively high
The Australian farmgate milk price is forecast to fall by 4% to 72.0 cents per litre (approximately $9.49 per kilogram of milk solids) in 2023–24 (Figure 1.7). This reflects lower export prices and a small increase in domestic production in 2023–24 (Figure 1.8). However, farmgate milk prices are forecast to remain historically high – 39% above the five-year average to 2021–22. Any farmgate milk price step-ups in 2023–24 are expected to be small as domestic prices are high compared to world dairy prices. If price step-ups were to occur, they would be most likely to occur later in the season and in regions where milk is primarily used for producing domestic market (drinking) milk.
High farmgate milk prices are being driven by strong competition between milk processors to secure supply. Australian milk production has steadily declined since 2001–02, which has led to significant excess processing capacity. This has caused competition between processors to secure milk supply and minimise the underutilisation of processing facilities. Similar to 2022–23, the combination of high farmgate milk prices and lower global export prices are expected to pressure processor profitability margins and discourage investment in milk processing facilities, particularly in export-focused regions such as Victoria. High domestic farmgate milk prices have also driven an increase in dairy imports, particularly from New Zealand (Box 1.2).
Figure 1.7 Average annual Australian farmgate milk price
Figure 1.8 Average annual Australian dairy product export prices
Export prices for most Australian dairy products are expected to fall in 2023–24 as demand for dairy products from China falls and global milk production rises slightly (Figure 1.8). Cheese prices are expected to fall the most (down by 22% to US$4,546 per tonne), followed by skim milk powder (down by 16% to US$2,863 per tonne), whole milk powder (down by 11% to US$3,131 per tonne) and butter (down by 10% to US$5,233 per tonne).
Cheese export prices are expected to see the largest fall as many manufacturers in other key exporting regions – particularly the European Union and the United States – increase cheese production and move away from producing less profitable milk powders. This has led to significant competition, driving down cheese export prices globally. The price premium for Australian dairy products in world markets, particularly for butter and cheese, has fallen significantly over recent months. Australian dairy products are now only selling at a small premium in world markets, more consistent with historical averages.
Box 1.2 Australian dairy imports are rising as Australian farmgate milk prices remain comparatively high
Despite being one of the world’s largest dairy exporters, Australian dairy import volumes rose by 23% to 295 thousand tonnes in 2022–23, driven by higher imports from New Zealand (Figure 1.9). In value terms, Australia imported $2.2 billion of dairy products in 2022–23, up by 36% from $1.6 billion 2021–22.
Australian dairy imports, particularly from New Zealand, have risen steadily for over 30 years due to both falling Australian milk production and rising domestic consumption of dairy products. Higher imports have allowed the Australian dairy industry to continue exporting a significant share of domestic milk production – which typically attracts a price premium in global export markets – and use imports to help service domestic demand. For example, in 2022–23, comparatively cheaper dairy products from New Zealand were used as the low-cost option for dairy products in supermarkets, and as lower cost ingredients for Australian food product manufacturers.
Australia mainly imports cheese, butter and whole milk powder from New Zealand (Figure 1.10). New Zealand accounted for 55% of the volume of Australian dairy imports in 2022–23; it has been the largest exporter of dairy products into Australia for over a decade. This is driven by two main factors:
- New Zealand’s status as a large dairy exporting country that produces milk at a relatively low cost.
- New Zealand's close geographical proximity to Australia which reduces shipping costs.
Together, these factors allow New Zealand dairy imports to be relatively competitive in the Australian market compared to other large dairy exporters such as the United States and European Union.
Figure 1.9 Annual Australian dairy import volumes by country
Figure 1.10 Annual Australian dairy imports from New Zealand
New Zealand accounted for around 80% of the increase in Australian dairy imports in 2022–23, mostly reflecting Australian farmgate milk prices being significantly higher than New Zealand farmgate milk prices (Figure 1.11). This price differential between the farmgate milk price (i.e., the farmgate milk price in Australia is higher than in New Zealand) increases the competitiveness of New Zealand dairy imports in the Australian market. This can increase the volume of New Zealand dairy imports into Australia.
Australian dairy imports from New Zealand remain elevated, with data for the September quarter 2023 showing volumes are 13% higher year on year. Australian dairy import volumes from New Zealand are expected to remain high over the rest of 2023–24 reflecting more competitive New Zealand farmgate milk prices (Figure 1.11). Additionally, slowing Chinese import demand and relatively high Australian dairy retail prices are expected to incentivise New Zealand dairy exporters to increase exports to Australia.
Figure 1.11 Annual Australian and New Zealand farmgate milk prices
Wool price to fall with weaker demand
Wool prices, as measured by the Eastern Market Indicator (EMI), are forecasted to average 1,175 cents per kilogram in 2023–24, down by 10% from 2022–23. This reflects falling Chinese demand for wool as global household consumption and discretionary spending remain relatively weak (see Economic Overview).
During the COVID-19 pandemic, Chinese households did not accumulate savings at the same rate as households in many advanced economies. This weighed on consumer spending including for luxury woollen garments following the relaxation of pandemic restrictions and contributed to a subdued economic rebound in China. As a result, wool stockpiles accumulated in China in anticipation of the rebound have been drawn down more slowly than expected, depressing Chinese demand for Australian wool and wool export prices.
Global demand for wool-based products outside of China is expected to be even more subdued in 2023–24 as the lagged impacts of higher interest rates reduce household consumption and discretionary spending in advanced economies. Demand for wool tends to be less price sensitive than other fibres due to its niche nature and fewer available substitutes; however, it is still affected by consumer confidence and disposable income levels. Prices for fine and super fine wools – used to produce more luxury garments such as suits – have been more affected by these subdued economic conditions than coarse wools.
Meat production and exports rising with increased slaughter
Drier seasonal conditions across most of Australia over 2023–24 are expected to reduce pasture availability compared to recent years, prompting higher cattle and sheep turn-off and increased meat production. Beef and sheep meat production are expected to rise as increased slaughter rates more than offset lower weights in 2023–24 (Figure 1.12).
Australian beef and veal production volumes are forecast to rise by 24% to 2.5 million tonnes (carcase weight) in 2023–24 reflecting both drier seasonal conditions and a relatively large cattle herd. The Australian cattle herd is expected to decrease slightly to 25.7 million head in 2023–24 as drier seasonal conditions across Australia increase cattle turn-off and slaughter, particularly for female cattle. As a result of the drier seasonal outlook, producers are expected to proactively destock their herds to retain feed availability and minimise potential damage to paddocks from overgrazing. Increased domestic beef production is expected to lead to a 28% increase in Australian beef and veal export volumes in 2023–24.
Sheep meat production volumes are expected to increase by 15% to 896 thousand tonnes (carcase weight) in 2023–24. The Australian sheep flock is expected to decrease slightly to 71.7 million head in 2023–24 as drier seasonal conditions increase turn-off and slaughter. However, pasture availability was average to above average for most of southern Australia during spring, which is expected to support good joining conditions and lambing rates in 2023–24. Sheep meat export volumes are expected to increase to 588 thousand tonnes in 2023–24 (up by 18% from 500 thousand tonnes in 2022–23) reflecting higher sheep meat production:
- Sheep slaughter volumes are expected to increase by 20% to approximately 10.4 million head in 2023–24. Processors are likely to allocate more kill space to mutton due to lower labour requirements and strong Chinese demand for mutton. Hence, mutton slaughter is expected to increase at a faster rate than lamb slaughter.
- Lamb slaughter volumes are expected to increase by 16% to approximately 26.4 million head in 2023–24. A strong lamb season is expected to have occurred in spring 2023 due to the large flock, high numbers of breeding ewes, high marking rates and lambing rates.
Lower cattle, sheep and lamb weights are expected to be driven by lower feed availability relative to 2022–23 because of drier conditions, and a higher proportion of female cattle and sheep being slaughtered. However, cattle, sheep and lamb weights are expected to remain high in historic terms. Sheep carcase weights have followed an increasing trend since around 2012–13 due to a shift in flock composition towards meat breeds (see Box 1.3 in the June 2023 Agricultural Commodities Report) and improvements in genetics.
Figure 1.12 Annual Australian meat production and export volumes
Slaughter capacity is expected to continue rising over the remainder of 2023–24. Industry liaison suggests that processors are operating near current capacity. However, if processor profitability and livestock supply in saleyards remains strong, processors will be incentivised to increase slaughter capacity. Processors may achieve this by moving to double shifts or operating six days a week; some processing facilities have already made this transition. However, industry liaison suggests that labour constraints could impact capacity increases (including by upgrading existing facilities or moving to longer operating hours).
Live exports cattle exports and live sheep exports to rise
Live cattle export volumes are forecast to increase to 708,000 head in 2023–24, up by 20% from 590,000 in 2022–23. Falling cattle prices are expected to increase demand for Australian live cattle exports.
- Live feeder/slaughter exports are forecast to rise by 34% to 651,000 head in 2023–24. Lower cattle prices in Australia are expected to incentivise greater demand from price sensitive Indonesian importers, leading to increased export volumes.
- Live breeder exports are forecast to fall by 46% to 56,000 head in 2023–24 as high levels of milk production in China increase the supply of milk. This is expected to reduce Chinese demand for Australian live dairy breeder exports.
Live sheep export volumes are expected to rise slightly by 2% to 690,000 head in 2023–24 reflecting increased turn-off rates (which includes live exports). Drier seasonal conditions are expected to incentivise destocking. Live sheep export volumes have trended down over the past 20 years reflecting the long-term decline in the Western Australian sheep flock. Almost all Australian live sheep exports are currently from Western Australia.
Box 1.3 Live sheep exports by sea policy assumed unchanged for December Agricultural Commodities Report
The Australian Government has committed to phasing out live sheep exports by sea, with an independent panel to advise on possible approaches. The panel has conducted stakeholder consultation across the Australian livestock export supply chain, animal welfare organisations, trading partners and other interested parties. The panel provided its report to the Minister for Agriculture, Fisheries and Forestry on 25 October 2023.
The Australian Government has confirmed the phase out will not take effect during this term of Parliament. As such, ABARES’ December Agricultural Commodities Report assumes no significant policy change to live sheep exports by sea over the outlook period (2023–24).
Australian milk production and volume of dairy product exports to rise
Australian milk production is expected to increase by 1% to 8.2 billion litres in 2023–24 as higher milk yields slightly outweigh a smaller dairy herd:
- Milk yields are forecast to rise by 1.9% in 2023–24 reflecting drier seasonal conditions across eastern Australia. Drier conditions, compared to 2022–23, are expected to improve the quality of both pasture and current season fodder in southern Australia, improving milk yields. Fodder prices have fallen but remain elevated. Lower fodder prices reflect increased sales of lower-quality fodder from last season.
- Dairy cow numbers are forecast to fall by 0.9% in 2023–24 as dairy farm numbers continue to fall.
- Falling dairy farm numbers are likely to be motivated by several factors. High land values may incentivise dairy producers to sell dairy operations. In addition, buyers often look to expand existing broadacre operations, or look to other land uses, rather than invest in dairy farming. However, the large decline in cattle prices will disincentivise dairy farmers from diversifying into beef production.
- Lower dairy cow numbers are expected to be somewhat offset by subdued live dairy breeder export volumes to China. High milk production in China has lowered Chinese milk prices, which has led to culling of dairy cows. Lower milk prices will likely disincentivise Chinese dairy producers from expanding their dairy herd or improving animal genetics, reducing Chinese demand for live dairy breeder cattle. Lower cattle prices have also reduced the incentive for domestic producers to cull dairy cows which will further support dairy cow numbers.
Dairy product production and export volumes are expected to rise slightly for most products in 2023–24 due to a small increase in domestic milk production. Cheese exports are expected to rise in 2023–24 as recent industry investment in cheese production facilities drives an increase in domestic production. Skim milk powder exports are expected to increase, with high domestic margins on dairy products made with milk fats such as butter and cream (co-products of skim milk production) incentivise higher production. This is also expected to increase the volume of butter exports. Australian producers are expected to reduce whole milk powder production and exports as China – the largest market for Australian milk powders – continues to work through its relatively large stockpile.
Wool production to rise with exports to fall slightly
Australian wool production is forecast to rise by 3% to 417 thousand tonnes in 2023–24, as a higher number of sheep shorn more than offsets a slight decrease in wool cut per head. The forecast increase in the number of sheep shorn reflects a small increase in the size of the sheep flock and lower shearing costs. Wool cut per head is expected to fall by 2% to 4.50 kilograms in 2023–24 but remain high in historic terms due to the relatively favourable growing conditions over much of the wool growing season. Wool cut per head is forecast to remain above the 10-year average.
Australian wool export volumes are forecast to be 418 thousand tonnes in 2023–24, down by 1% from 2022–23. Despite a small increase in wool production, wool exporters are expected to retain current inventories and only look to increase wool exports once global wool demand and the wool prices improve.
World beef supply is expected to rise and weigh on world export prices as increased production in Australia and Brazil outweigh a small decline in US beef production:
- Australia is the world’s third largest beef exporter. As a result, the substantial increase in Australian beef production will contribute to higher world beef supply.
- Brazil’s beef production and exports are expected to rise in 2023–24. Throughout 2023, the Brazilian cattle industry has entered a phase of herd destocking, increasing the supply of cows for slaughter and beef production. This is expected to drive an increase in Brazilian exports in 2023–24.
- United States beef production is expected fall in 2023–24 but remain elevated. The rebuilding of the US cattle herd is now expected to start in 2025. Although US beef production has started to fall, this reflects the smaller herd size following prolonged destocking rather than slowing destocking activity. The proportion of female cattle in feedlots and being slaughtered remains high, signalling that the US herd remains firmly in a destocking phase. Declining US beef production has also caused a drawdown of US beef inventories – down 18% year-on-year in August – signalling further tightening of US beef supply.
World dairy prices are forecast to fall in 2023–24 reflecting rising world milk supply:
- European Union milk production is expected to grow slightly in 2023–24 despite slowing over recent months. This reflects expected rising milk yields, because of more favourable seasonal conditions compared to last year. Lower dairy cow numbers are expected to offset higher milk yields slightly, driven by a combination of lower milk prices and higher input costs incentivising producers to sell cows.
- New Zealand milk production is expected to remain stable in 2023–24 as higher milk yields, reflecting drier seasonal conditions, are offset by a decline in dairy cow numbers.
- United States milk production is expected to remain relatively stable as lower cow numbers are offset by higher yields. Relatively high cattle prices, rising input prices, and lower domestic milk prices have incentivised producers to sell their dairy cows for slaughter, placing downwards pressure on milk production.
World sheep meat supply is expected to rise in 2023–24 driven by higher Australian and New Zealand production. This is expected to drive down world export prices:
- Australian production and exports of sheep meat in 2023–24 are expected to rise, placing downward pressure on world prices. Australia is the world's largest exporter of sheep meat, exporting around 48% of world sheep meat exports in 2021–22.
- New Zealand production is expected to rise slightly in 2023–24 due to improved breeding conditions and lambing rates. Fewer breeding ewes and structural shifts in local land use to forestry and carbon farming are expected to continue constraining the size of the flock. New Zealand is the world’s second largest sheep meat exporter.
World wool supply is expected to remain stable in 2023–24 as production from both Australia and New Zealand – the world's two largest wool exporters that account for approximately 75% of global exports – remains similar to 2022–23 levels.
World demand for Australian beef is expected to rise in 2023–24, however this is expected to be more than offset by higher world supply, lowering world beef prices. Demand from China, the United States, Japan and the Republic of Korea is expected to rise:
- China’s demand for Australian beef is expected to improve over 2023–24. Demand for Australian beef exports to China have been relatively strong recently despite their subdued economic recovery. Beef exports to China were 22% higher year on year in the September 2023 quarter. Chinese beef importers appear to be becoming more price sensitive due to the challenging economic conditions; lower Australian beef export prices in 2023–24 are expected to support stronger Chinese consumption. However, relatively cheaper Brazilian beef exports remain the key competitor for Australian beef products in the Chinese market.
- United States import demand for Australian beef is also expected to rise as US beef production and inventories decline. Australian beef exports to the United States have risen sharply over recent months; beef exports to the United States during the September 2023 quarter were 111% higher year on year.
- Demand for Australian beef exports from Japan and the Republic of Korea are expected to rise slightly in 2023–24.
- Lower beef exports from the United States – a major competitor for Australian beef exports – is expected to improve demand for Australian imports. This is expected to outweigh the effects of challenging economic conditions on consumer demand and elevated beef inventories.
- During October the Republic of Korea confirmed that it was experiencing an outbreak of Lumpy Skin Disease (LSD). As a result, the Government introduced measures to contain the spread of LSD on cattle farms including several suspensions on cattle movements. This could increase demand for Australian beef imports as around 90% of beef imports are sourced from either Australia or the United States.
World demand for sheep meat is expected to rise in 2023–24 as higher demand from China and the Middle East outweigh lower demand from the United States. Falling global sheep meat prices are expected to increase both global sheep meat demand and consumption, particularly in price-sensitive markets. However, this will only partially offset the impact of higher global sheep meat supply.
- China’s demand for sheep meat is expected to increase year on year in 2023–24 as consumer spending on food remains relatively robust and the competitiveness of Australian sheep meat exports improves. Mutton exports to China were 46% higher year-on-year in the September 2023 quarter.
- Demand for sheep meat in the Middle East is expected to increase due to higher consumption, tourism and population growth. Mutton exports to the Middle East were 119% higher year-on-year in the September 2023 quarter.
- Demand from the United States is expected to be subdued due to pressure on disposable incomes and a subdued economic outlook. The United States is Australia’s highest value market for sheep meat, importing predominantly higher value fresh or chilled lamb cuts.
China’s demand for Australian dairy products is expected to remain subdued in 2023–24 due to both high levels of Chinese milk production and challenging economic conditions. China’s milk production remained relatively high throughout 2023. This reduced Chinese milk prices and decreased both the competitiveness of and demand for imported dairy products. However, there have been signs of improving Chinese demand over recent months as falling world prices incentivise Chinese buyers to enter the market.
World wool demand is expected to fall in 2023–24 as weak household disposable incomes reduce discretionary spending on woollen garments. The lagged impacts of higher interest rates on debt repayments and household budgets are expected to reduce discretionary spending on goods such as luxury wool garments, especially in advanced economies.
Biosecurity remains a key risk for the livestock industry
Foot-and-mouth disease and lumpy skin disease have both been reported in Indonesia and other countries to Australia's north. If introduced to Australia, these diseases would reduce market access for Australia’s exports and be extremely disruptive to Australia's livestock industry. The Australian Government is continuing to work with industry and the Indonesian Government to develop and strengthen prevention and preparedness measures.
Australia-UK Free Trade Agreement entered into force on 31 May 2023
The Australia-UK Free Trade Agreement (A-UKFTA) entered into force on 31 May 2023. The FTA will remove tariffs from over 99% of Australian goods. Tariff elimination periods vary by product, ranging from immediately upon entry into force to ten years.
This agreement is expected to benefit Australian livestock exporters, providing immediate access to substantial duty-free transitional quotas for beef and sheep meat. Within 10 years, tariffs on all Australian agricultural goods will be completely eliminated. Australian dairy products will gain immediate access to duty-free transitional quotas, with the elimination of all dairy tariffs over five years.
US herd destocking presents an opportunity for Australian beef producers over the medium term
Ongoing US cattle herd destocking is expected to increase the competitiveness of Australian exports over the medium term. The continued destocking activity has caused the US beef cow herd to reach its lowest level since 1962 (Figure 1.13). In the March 2023 Agricultural Commodities Report, it was assumed that the US herd rebuilding cycle would begin in late 2023; this report assumes that the rebuild starts in 2025. As destocking activity continues, this is delaying the onset and rate of the US beef herd rebuild. As a result, when the US beef herd does eventually shift into a rebuilding phase – which typically lasts for around five years – their beef production and exports are expected to fall for a prolonged period.
The US herd rebuild presents two opportunities for Australian beef exports over the medium-term. Firstly, the US is a major importer of Australia beef products; falling US beef production is expected to increase US import demand for Australia beef products. Secondly, Australian and US beef exports compete in similar markets, particularly across Asia. Falling US beef export availability is expected to increase import demand for Australian beef exports, supporting higher export prices for Australian beef products over the medium term.
Figure 1.13 United States beef cow inventory
Tightening of live cattle export eligibility criteria could affect some producers
Following Indonesia’s recent live export suspension, Indonesian officials are now scrutinising all incoming consignments of Australian cattle, particularly those with skin markings. In response, Australian Government veterinarians have taken a more conservative approach when inspecting consignments in quarantine prior to export. Australian officials currently class cattle with skin lesions, marks or pre-existing scars as ineligible for live export. This tightening of eligibility criteria aims to prevent skin lesions from being mistaken in Indonesia for early signs of Lumpy Skin Disease.
While tighter eligibility criteria should not impact total live feeder/slaughter cattle export volumes greatly, specific producers may be affected. For example, cattle producers across Northern Australia who hold a significant number of cattle with skin markings are now unable to utilise the live export channel to turn-off their cattle. This presents a challenge for producers in certain northern regions where other options for cattle turn-off, such as domestic slaughter, are less available.