Global crunch to squeeze red meat demand

AFTER soaring to record highs in the last few years sheep and cattle producers are being warned to expect lower prices to continue as the impact of the global economic slowdown hits home.

Rabobank senior proteins analyst Angus Gidley-Baird spoke to Tasmanian producers at a series of events recently and said the impact of a global economic slowdown is now being seen in sheep and cattle markets across the country.

“Globally there’s an economic slowing into all markets we sell into,” he said.

“That’s obviously going to have an impact on consumption, so in that context, demand is going to be softer.”

On the production side however, Mr Gidley-Baird said there is a continuation of herd and flock rebuilding across the country. Lamb slaughter is expected to increase significantly this year by 5-10 per cent and reach a new record high. Beef slaughter numbers are also predicted to increase about 5-10 per cent.

“That’s coming off a very low base though, so they’re still a long way behind what they were before.”

Cattle slaughter numbers this year are expected to be 6.7 million head, still well down on the normal average of 7.5-8 million.

“A softer demand outlook and growing supply domestically, even with a lower Australian cattle herd, we’re expecting prices to be a little bit softer,” Mr Gidley-Baird said.

“Definitely not the record levels we saw in 2022, but still at the same time there’s no real dramatic downside we can see.”

Mr Gidley-Baird said prices across the country, including Tasmania have now eased back from record levels in both sheep and cattle markets.

“Lamb prices came off halfway through last year and cattle prices dropped in October to December last year, so we’re probably not too far off the bottom,” he said.

“They’ve resettled down to what, according to our numbers, is a more sustainable level. Given we’ve got good seasonal conditions, we’ll probably see them hover around what they are at the moment for the next 12 months.”

As the global economy and consumer budgets come under pressure, Mr Gidley-Baird said consumers may choose to eat out less, which could expose lamb to more price fluctuation, particularly in the US export market.

“Particularly in the US we’ve seen a lot of growth in that food service base and I know they’re pushing retail as well, but it’s really been the food service that’s driven a lot of the volume growth in the US,” he said.

In the domestic market, Mr Gidley-Baird said the impact of interest rate rises is starting to be seen as consumers start to change their spending patterns.

In Tasmania, Mr Gidley-Baird said things are looking positive, particularly with the expansion of the state’s irrigation schemes. “It always amazes me when I come down here and see farmers watering grass,” he said. “Normally in mainland states, if you’ve buying irrigation water it’s generally going on to a crop of some sort. The availability of water and opening up infrastructure here is an amazing benefit that they’ve got here to be able to grow an finish stock year round is an amazing benefit.”

Mr Gidley-Baird said being able to develop grass fed production systems with irrigation was a significant advantage. With softening prices and rising costs, Mr Gidley-Baird said there could be some challenges for producers.

“Costs are probably going to be the challenge this year given the softer prices and if you can manage your costs, you should be pretty good because historically prices are still quite healthy,” he said.

One of the other major challenges Mr Gidley-Baird said could impact the industry is a shortage of labour, especially in the meat processing sector.