CATTLE prices in Australia are tipped to stay around current record levels for at least the next two years, but the sheep industry has been heavily impacted by lockdowns and lack of labour availability, according to ANZ’s latest agri commodity report.

With sheep processors still playing catch-up for a year of low slaughter rates, ANZ head of agribusiness, Mark Bennett, said the effects of COVID-19 lockdowns were still rippling through the sector.

“The Australian sheep industry has had a solid first half of the year – not headline catching like the cattle industry – but a consolidation of the past five years’ growth and a profitable operating level,” he said.

“While the sheep sector has been less impacted by the restocking zeal which has pushed cattle prices into the stratosphere, it has also felt a greater impact from some of the side effects of COVID-19 and associated lockdowns.”

Saleyard restocker lamb prices have trended downward for much of the year – albeit with some significant volatility, driven by low numbers in the yards due to seasonal factors – including wet weather and producers holding stock back in the hope of a price rise.

The decline in slaughter and processing throughout the first half of the year has seen many producers retain stock on farm, leading to the expectation of many heavy lambs still to hit the market.

But the significant rain had a different effect on the cattle industry, with the market experiencing a period of completely unprecedented growth from the start of 2020 until early 2022, as farmers geared towards sustained restocking activity after several years of price volatility.

“While 2022 is only just approaching the halfway point, the signs are reasonable that cattle prices may now be entering a relatively flat period,” ANZ executive director of agribusiness research, Michael Whitehead said.

“Over the course of this year, prices have stayed in a roughly narrow band, mostly within 1100 to 1150 cents per kilogram.

“In dollar terms, the relative stability of cattle prices of the current period has not been seen since 2006.

“In looking forward to the rest of 2022 and subsequent years, ANZ has utilised updated modelling, aimed at predicting cattle prices.

“The model incorporates a range of variables impacting the beef sector, including herd growth rates, female slaughter levels, exchange rates and US herd growth.

“Under the model – and noting that it has been quite accurate historically – Australian cattle prices are forecast to stay high for the next two to three years, potentially hovering around the 1000 c/kg level.

“Arguably, in the absence of a black swan event such as a drought, there would appear no major reason why cattle prices should fall markedly for at least the next year or two.

“Domestic and global demand looks set to remain strong, while producers are also still in the process of rebuilding their herds in the years following the drought.

“Some slowing in cattle sales to both processors and feedlots could occur if labour shortages continue to restrict operational capacity at abattoirs.”

Mr Bennett said the challenges for the sheep industry were great, but good news might not be far off.

“As the national flock is expected to hit highs not seen since 2013, and the competition for land from cropping and beef, the steam might come out of the national flock rebuild,” he said.

“While there are several issues overhanging from the pandemic still impacting saleyard prices and supply, the coming winter months should help regain a demand/supply balance.

“After that, all signs point towards a spring kick in the market, with some in the industry even going so far as to speculate that the National Trade Lamb Indicator may breach the magic 1000 cents mark.

“For wool growers, the outlook is somewhat buoyed by the view that Australian wool remains somewhat under-priced given the lack of global supply of fine wool, following the concerns over foot-and-mouth disease in South Africa limiting their supply.

“This view seems to be supported by ABARES (Australian Bureau of Agricultural and Resource Economics and Sciences) which is predicting an almost 200c rise in the average EMI (Eastern Market Indicator) in 2022-23, which lines up well with what the industry seems to consider the ‘right’ level.

“However, as wool production picks up as a result of flock rebuilding and strong season, the strong domestic supply may keep some slight downward pressure on prices.”

To view the full report, visit bit.ly/3AsVC5y