WHAT a year it’s been. The challenges to the south-west Victorian region have been enormous.

It was two days before Christmas and we had two utes bogged in the paddock! Obviously – one was attempting to pull the other out, with no success. Bigger machinery was required, meaning a bigger mess in the paddock, but the job was sorted. Ridiculous at this time of year!

After a tally of this year’s rainfall – we are 11 ½ inches (almost 28cm) above average, and most of that falling through spring and into summer.

It is always a topic of conversation as to ‘who’ will start silage first, but this year it was a matter of ‘who is game to have a go?’ Silage season was very late and we (like so many others) were baling hay through Christmas.

Further north – in the cropping country of the Wimmera/Mallee – many have ended the season with a good quantity of wheat and barley, but much has been down-graded. Faba beans have been (for the most part) ruined and either burnt off or ploughed back in. It has been quite hit and miss in terms of how badly the crops have been affected, depending on where the late rains landed. The upside is that the increased soil moisture retention should ensure a good start to the next cropping season.

As a girl born in the Mallee, the mantra was always “you never count it, until it’s in the bank!”.

There have been serious shearer and shed-hand shortages again this year and trend seems to be continuing to worsen. Flies and worms are going to be of major concern for sheep farmers heading forward after the wet conditions, but even with the challenges, the animal protein market seems to have held up.

Justin Sherrard, Global Strategist for Animal Protein at Rabobank reported: “It has been a year like no other for the animal protein industry. Companies have grappled with rising input prices, supply chain disruption and geopolitical strife, many of which are unresolved as we head into 2023.

“These factors have increased costs across the market, but while prices rise quickly, they tend to fall more slowly. We therefore expect prices to remain high next year, even as the market enjoys steady production growth on the back of a growing supply of aquaculture and poultry. This masks reductions in the supply of beef, due to contraction in the US after years of drought, and the weakening pork market in Europe.”

“Animal protein production levels are expected to increase, with Rabobank’s analysts forecasting year-on-year growth in major markets of five million tonnes – or one per cent – to a total of 430 million tonnes next year, driven by demand for poultry, fish and seafood offsetting the weaker performance of beef and pork. However, the production growth rate will be lower than the two per cent recorded in 2022.

“Industry participants face the need to adapt to sustainability challenges and ongoing biosecurity risks if they are to remain competitive in the market over the longer-term. To prosper in the future, animal protein companies must pivot to become more sustainable businesses.”

Rabobank expects producers and processors to intensify their emissions commitments next year, but this will require greater investment in areas such as smart data to make their operations and supply chains more sustainable.

High prices for feed and other input costs are additional headwinds which have the potential to impact the animal protein industry in 2023 and beyond.

Rabobank senior animal protein analyst, Angus Gidley-Baird, said: “for Australia, supply and demand will be on different trajectories in 2023 – as livestock numbers increase and producer demand drops, with livestock prices expected to ease as a consequence.

“With La Nina persisting and the Indian Ocean Dipole remaining negative, most areas of Australia are expected to have average to above average rainfall into 2023,” he said.

“Such favourable conditions will support the upward growth in livestock inventory numbers.

“Sheep numbers are expected to recover from drought-impacted years. This higher inventory will support increased lamb production in 2023 – up between four and six per cent.”

On the other hand, Mr Gidley-Baird said: “Rabobank believes cattle numbers have not recovered as quickly as sheep numbers, and with good pasture availability in northern areas, cattle producers will still be looking to grow their herds.

“However, despite increased inventory, labour constraints and tight margins likely mean beef production will show no further growth in 2022 before lifting by five per cent in 2023.”

The report says while favourable seasonal conditions and low livestock numbers are supporting consumer demand and keeping livestock prices elevated – noting lamb prices returned to five-year average levels in late 2022 – demand is softening.

“Import prices for Australian beef into key markets, while still historically high, have declined since early 2022 and order volumes appear to be dropping on softer consumer demand,” Mr Gidley-Baird said.

This is cutting margins for the post-farmgate operators in the supply chain. In addition to the challenges of accessing labour, thin margins provide no incentive to increase volumes or pay higher prices for cattle.

“At some point, these two markets – the production market and the consumption market will collide – most likely driven by a change in season or oversupply of livestock – and livestock prices will correct downwards,” he said.

“Good availability of lambs and softer economic conditions are expected to result in lamb prices remaining relatively stable through 2023, although softer economic conditions pose a downside risk.

“Cattle prices are expected to ease in light of increased cattle numbers and softer producer demand.”