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Meat prices stage a comeback

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2023-11-13

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Australian cattle and sheep producers are breathing a sigh of relief as meat prices stage a comeback after a challenging period of oversupply and plummeting values.

According to data from Meat & Livestock Australia (MLA), the industry benchmark, the Eastern Young Cattle Indicator (EYCI), has rebounded by 14 percent, reaching $3.99 per kilogram after bottoming out at $3.49 in October. Lamb prices have also seen a significant resurgence, surging by 12 percent to $4.59 per kilogram, up from a low of $4.11 in September.

Rabobank's senior animal protein analyst, Angus Gidley-Baird, shared optimism: "Producers now have a clearer picture of their stock numbers, and we can expect increased stability in the market." Gidley-Baird predicts that EYCI prices will stabilize between $4.50 and $5 for cattle and around $4.50 to $5 for lamb over the next few months.

However, the journey to recovery has been far from smooth. Cattle prices saw a staggering decline of up to 70 percent over the past year, with lamb prices also taking a severe hit—plunging as much as 76 percent for mutton meat, falling below the 10-year average.

Robert Mackenzie, a fourth-generation Australian beef producer at Macka's Pastoral near Port Stephens, NSW, expressed surprise at the 2023 price drop: "No one expected 2023 to be like this. At times, a bale of hay was worth more than a cow."

In March, Mackenzie sold 500 Angus verified females with a three-year-old cow and calf for $5,450—his highest price this year. However, prices have since plummeted.

In Western Australia, prices hit as low as $1 or $2 per head as the prospect of hotter and drier weather conditions brought on by El Niño prompted farmers to sell cattle and sheep in large numbers. Between 2020 and 2022, heavy rainfall allowed farmers across Australia to rebuild their livestock numbers, with breeding ewe numbers reaching their highest levels in 16 years.

Farmers had hoped that the worst was behind them, especially with recent heavy rainfall in some parts of the country. "Getting rain at this time of year is crucial and will naturally boost beef and lamb prices," explained Mr. Mackenzie, who owns 4,000 Angus cattle and 500 studs on 16,000 acres.

However, Mackenzie does not want prices to return to the dizzying levels of 2022 when the nation was still recovering from one of its worst droughts in history. He believes that a sustainable price for a 300kg Angus steer, factoring in meat processing, machinery, transport, and wages, should be around $1,700, as opposed to the current $600. Last year, prices reached as high as $2,100, which he deems unsustainable: "That price was not sustainable, and we were heading for a crash because the only person who was making any money was the farmer."

Ripley Atkinson, a manager at MLA, expects prices to increase only modestly in the coming months, with more significant gains likely around mid-2024. He remains cautious, citing elevated supply and dry conditions that could limit improvements. "If seasonal conditions deteriorate more widely, that could decrease confidence and exert pressure on prices due to weaker animal quality," Mr. Atkinson said.

Nevertheless, he believes there is greater potential for prices to improve than to fall further, with support anticipated from the United States. Wet conditions are expected to reduce U.S. production next year, creating an opportunity for Australia to capitalize on high demand and support cattle prices.

Retail prices have started to decline, albeit remaining relatively high due to multiple intermediaries in the supply chain. Coles has announced reductions of up to 36 percent on lamb products, including leg roast and cutlets, while Woolworths has reduced prices on nearly 80 red meat products over recent months, along with a 20 percent price cut on standard lamb cuts. Aldi is offering up to 20 percent savings on lamb products this week.

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