Australian cattle market “in balance”, but price upside potential ahead – Rabobank Beef Seasonal Outlook 2024

Australia’s cattle market is sitting in a “state of balance” – with improved beef production waiting on an increase in demand – but an upside in prices is expected towards the end of the year, Rabobank says in its Australian Beef Seasonal Outlook 2024.

The current absence of any strong demand – along with a higher herd inventory, with no real liquidation or rebuilding urgency – means cattle prices are more exposed to changes in producer sentiment, the agribusiness banking specialist says. And this, in turn, is highly dependent on seasonal conditions.

However, as the year progresses, according to report author, RaboResearch senior animal protein analyst Angus Gidley-Baird, “we feel global beef demand, led by the US market, will start to have a stronger influence on the Australian cattle market, providing upside to cattle prices”.

Mr Gidley-Baird said there are, though, “a couple of ‘known unknowns’ to watch”, which could weigh on the market.

“With a heavily producer-influenced market, any negative seasonal change could see producer sentiment fall and prices drop accordingly,” he said. “We saw this happen last year with the declaration of El Nino – every dry month, we saw cattle prices drop as producers lost confidence in the market.

“Furthermore, if demand recovery in Australia’s key Asian beef markets fails, our growing production may cause prices to fall.

 

Cattle numbers

The rebuild of the Australian breeding herd over the past “couple of years” is now generating increased numbers of slaughter-age cattle, the report said.

“We believe Australian cattle slaughter will rise about 15 per cent in 2024 to be close to eight million head,” Mr Gidley-Baird said. “Increases in processing capacity with increased labour will also support the rise in slaughter numbers. Eight million head is slightly higher than the 10-year average from 2014 to 2023 and we believe is more reflective of a ‘normal’ slaughter volume for Australia.”

Mr Gidley-Baird said with the increased slaughter number, beef production is set to increase of 10 per cent to 2.4 million tonnes cwt (carcase weight) for 2024. This is slightly higher than the 10-year average of 2.2 million tonnes.

 

Increasing exports

Mr Gidley-Baird said while domestic consumption of beef is forecast to drop slightly, Australian beef exports in 2024 are expected to rise by 10 per cent off the back of increased production.

“More challenging economic conditions domestically lead us to expect domestic per capita consumption will drop slightly from 23.7 kg/capita in 2023 to 23.4 kg/capita in 2024,” he said.

“Although commentary suggests consumers may be trading down to cheaper cuts, data indicates that they are not trading out of beef. With total domestic consumption almost static, all the increased production will be sent to the export market, leading exports to increase by almost 10 per cent to 1.2 million tonnes cwt, the highest volume of exports since 2019.”

The Rabobank report said demand in key Asian markets, although soft, is expected to improve in 2024.

Mr Gidley-Baird said declining US exports to Asian markets will support increased Australian volumes to these destinations, but Australian exports will need to compete with increased volumes from South American suppliers.

“The US is also expected to be a strong importer of Australian beef in 2024,” he said, “Following an 84 per cent lift in exports in 2023, we are expecting a further increase in Australian volumes to the US in 2024.”

 

Global trade

Rabobank said global beef markets are running at two speeds – with a strong US market outperforming softer demand in Asian markets.

Mr Gidley-Baird said global beef production is down slightly, but demand is slowly improving.

“We expect global beef production to decline very slightly in 2024 with contractions and growth across various regions almost balancing themselves out,” he said.

The report said the US is expected to see the largest contraction in production, down 3.5 per cent (approximately 400,000 tonnes) while Brazil, Australia and China will see the largest growth – up 1.5 per cent (110,000 tonnes), 7.8 per cent (169,000 tonnes) and 2.5 per cent (180,000 tonnes) respectively.

“After import growth rates slowed in 2023, we expect key Asian markets will improve and imports increase slowly through the course of 2024,” Mr Gidley-Baird said.

“The US market, with its declining production and economic outlook, is expected to retain fairly steady demand which is forecast to see US imports increase with room for price upside. Meanwhile export volumes from South American countries are set to increase, adding competitive pressure to Australian beef in Asian markets.”

 

Domestic prices

The bank expects a more bullish cattle market in the year ahead, but that will still be subject to producer sentiment.

Rabobank projects the EYCI (Eastern States Young Cattle Indicator) will be relatively stable in 2024 – trading in a band between 600 to 750c/kg cwt.

Mr Gidley-Baird said with no strong restocker or liquidation pressures in the system, the increased livestock numbers are expected to be balanced by the recovery in global demand.

“After the larger-than-expected drop in the EYCI in 2023, projected prices suggest the EYCI should be 20 per cent higher on average in 2024 and potentially finishing the year 40 per cent higher than where it finished in 2023,” he said.

Mr Gidley-Baird said without strong demand, producer sentiment will drive the market.

“While we expect beef demand to improve, this may not occur until the second half of the year. Without the improvement in demand, the increasing cattle supplies means producer buying and selling activities will continue to have a large impact on cattle prices,” he said. “We saw this in 2023 and into 2024, where cattle price movement followed producer sentiment and seasonal conditions.”

Mr Gidley-Baird said dry seasonal conditions in the months of February, May, August, September and October 2023 saw cattle prices drop, while wetter months of November 2023 and January 2024 saw upward movements in prices.

“The Bureau of Meteorology has declared the El Niño weather event of 2023-24 to be over, and seasonal conditions to be average in the coming months. Therefore, we are expecting prices to remain steady,” he said.

 

Rabobank Australia & New Zealand Group is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 125 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 37 countries, servicing the needs of approximately 8.4 million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 90 branches throughout Australia and New Zealand.