While Rabobank forecasts Australian farmgate prices to decline, it expects the fall to be less severe than that of the US, or seen previously in Australia.
Australian cattle producers are being cautioned to “look beyond the price peak” by a new industry report, with current record-high prices unlikely to be sustained in the medium to longer term.
In its latest beef research report, Australian and New Zealand beef industry – looking beyond the price peak, agribusiness banking specialist Rabobank says while Australian cattle prices are likely to remain high for the next six to 12 months, they will then come under pressure as global beef production, and indeed total animal protein production, increases.
This will likely see prices ease, albeit to trade in a higher-than average range out to 2020, the report says, identifying six key developments that will influence cattle farmgate prices in coming years.
In light of this outlook, the Rabobank report says Australian beef producers need to be looking beyond the current high-priced environment and take a cautious, yet optimistic, approach – particularly those producers purchasing stock, looking to rebuild or expand production.
“Australian farmgate cattle prices are now the highest of all key producing countries in the world,” says report author Rabobank animal protein analyst Matthew Costello, “and in our view this record pricing cannot be sustained in the medium to longer-term.”
Mr Costello says current prices are beginning to challenge the purchasing decisions of consumers, with the average quarterly Australian beef retail price rising by 23 per cent between 2013 and June 2016, compared with a five per cent drop in the retail price for poultry.
“The US, where beef cattle prices have fallen by 42 per cent from their late-2014 peak, provides an interesting case study in this regard, highlighting the push-back from domestic consumers in response to high beef prices,” he says.
“While we don’t believe the Australian industry will show the same outlook as that of the US – in terms of the speed and degree in which farmgate prices declined – it does highlight how quickly unsustainable pricing can place pressure right along the supply chain,” he says.
Mr Costello says while Rabobank forecasts Australian farmgate prices to decline, it expects the fall to be less severe than that of the US, or seen previously in Australia.
“One key point of difference is the outlook for ongoing limited domestic supply – given the reduction in the female breeding base – as well as the diversification of export markets, with demand continuing to grow, particularly in China,” he says.
“And this should see prices settle in a higher-than-average price range out to 2020, in comparison to historical averages.”
