Operating environment
The favourable position of Australia’s red meat industry continues despite a number of significant challenges over the past year, which will continue to develop as we look ahead.
Lamb, sheep and cattle carcase weights were at historically high levels in 2022 due to the seasonal conditions, as well as high prices and a greater proportion of grainfed animals being turned off. Carcase weights were also bolstered by improvements in genetics and management practices however, as conditions have normalised, carcase weights have eased.
The national flock grew 3.6% in the 2022–23 financial year to reach 78.8 million head, its highest level since 2007. In a similar fashion, the national herd grew 4% to 28.7m head – fuelled by good growing conditions in Queensland and the Northern Territory. The scale and size of this national rebuild has resulted in a significant increase in slaughter-ready animals – both cattle and sheep – during the first half of 2023. This large supply increase has put significant downward forces on the livestock prices that producers are receiving.
This increase in supply is also putting pressure on the supply chain with many processors working close to their current capacity, with access to labour limiting how many animals they can process. Labour shortages remain an area of concern across the entire supply chain. Resuming international travel post-COVID , new immigration schemes and immigration plans for skilled labour will ideally see labour issues ease in the next 12–18 months, and into the future.
Australian red meat processing costs are consistently higher than all our major competitors’ and energy prices continue to escalate. Inflation jumped on the back of supply and demand mismatches, and will continue to drive upward pressure on costs, impacting profit margins.
Further along the supply chain, the economic performance of China and the USA has impacted demand and their price sensitivity. As we head into the 2024 financial year, the supply of goats, sheep, lambs, and cattle are all showing signs of increasing as the national rebuild stabilises. This will translate into record volumes of Australian goat and lamb meat being slaughtered.
On a global perspective, the USA continues to liquidate its herd due to drought conditions. When the USA emerges from the drought and begins its herd rebuild it will need to reduce its production. Australia is well positioned to take advantage of this global protein demand and falling USA production.
Financial returns were positive and the national herd and flock increased
In the 2022–23 financial year, sheep and lamb producers generated receipts of $4.8billion and remained the most profitable sheep farmers in the world, according to a global benchmarking study. A survey of nearly 2,000 sheep producers in May 2023 indicated that producers were confident about the future of the industry and that industry sentiment remained positive.
In the 2022 calendar year Australia produced a record amount of lamb meat – 537,013 tonnes. As we move through 2023, the record volume of lamb meat produced in 2022 is set to be surpassed this year – ensuring a strong outlook for global lamb sales.
Like the sheep flock, the national cattle herd also increased in 2022–23 financial year. In the 2022 calendar year, producers retained cattle to rebuild their herds in a manner not observed in many decades. The retention of stock led to the lowest national adult cattle slaughter in 38 years. In the first half 2023, cattle slaughter increased 16% as those breeding cattle used during the rebuild hit the market. In the 2022–23 financial year cattle producers received $14.2b in proceeds for the sale of slaughter animals which was 1.4% below the previous year.
Cattle and beef supply increased, and prices remained above 5 and 10 year averages
Eastern Young Cattle Indicator
No Data Found
The Eastern Young Cattle Indicator (EYCI) average 813¢/kg carcase weight in the 2022–23 financial year. This was 29% and 7% above the ten-year and five-year averages respectively and demonstrates that prices remained relatively high for most of the year, but have eased in 2023 as supply increased.
Paddocks are full of cattle and calves, ensuring a strong supply of animals will continue into 2024. This increase in turn-off has translated to increased beef production. In 2022–23, Australia produced over two million tonnes of beef. This increase in production and subsequent exports reinforced to global customers that Australia is a reliable and constant source of high-quality protein. Prolonged drought conditions and the subsequent expected period of herd rebuilding will provide further opportunities for Australian beef in export markets.
Sheep flock is at its highest since 2007 with record lamb production and the flock rebuild maturing
National Heavy Lamb Indicator
No Data Found
In the 2022–23 financial year the national flock reached 78.8 million head, the highest it has been in 15 years. This has been driven by favourable seasons in southern Australia over the past three years and an improvement in marking rates.
The floods in NSW and Victoria in the 2022 spring impacted production and slaughter. The floods also effected pasture growth during a key period in the lamb cycle, which meant many lambs were delivered to the market later than usual. Despite the disruption to supply chains caused by the flooding, a record 557,274 tonnes of Australian lamb meat was produced in the 2022–23 financial year.
This record did impact the annual trade lamb price. The national trade lamb averaged 728¢/kg carcase weight – this was 8% above the 10-year average, but 8% below the 5-year average. The 5-year average reflects the high prices in 2020 and 2021.
The record lamb production has also translated into higher domestic consumption. In the 2022–23 financial year, consumption of lamb meat in Australia was 193,151 tonnes, a 7% increase on the previous financial year. This level of aggregated domestic consumption is the highest it has been since 2018.
Goatmeat supply high and slaughter reaching record levels
Goat Over-The-Hooks Indicator
No Data Found
According to the Australian Bureau of Statistics Agricultural Census, there has been an increase in managed goats in Australia of more than 80% in the five years between 2016 and 2021. This increase in managed goat operations and the good seasonal conditions over the past three years have contributed to goat slaughter reaching its highest level in six years.
Once again, this increase in supply has resulted in softer livestock prices. Goats have been significantly impacted given goat meat competes with mutton in many markets – and mutton production is also increasing.
Encouragingly, processing in NSW has increased substantially with the opening of the Bourke abattoir. It has ensured there is national goat processing capacity, as goat supply simultaneously increases.
From an export perspective, there has been significant growth in goat meat exports to China in 2023, providing strong demand at a time of high supply. The USA, China and South Korea remain the key destinations for Australian goat meat exports.
Seasonal conditions have certainly normalised across much of Australia after three years of above-average conditions due to La Niña weather events. Moving forward, there is likely to be continued pressure on production and supply chain efficiency given the on-going issues with climate variability, high inflation and costs of production.
Board business
At MLA’s 2022 AGM, members voted on the election of three directors to the skills-based board, returning director John Lloyd as well as two first-time directors, Tess Herbert and Jack Holden. Both Tess and Jack have provided extremely valuable input into the Board meetings throughout their first year, and I commend the MLA Selection Committee on their robust process.
The past year also saw the Board able to go on site visits to engage directly with producers, meet with some of our key R&D partners, and undertake a biosecurity tour to see firsthand how biosecurity threats are handled at our borders. These experiences are all highly valued by the Board and serve to further inform discussion and decision-making.
I would also like to thank my fellow directors and all MLA staff for their dedication to and hard work for our industry over the past year.
MLA continues to work on marketing, research and development outcomes that foster the long-term prosperity of the Australian red meat and livestock industry and support industry to be as resilient as possible in the face of the on-going challenges. These priorities and investments are the hallmark of industry’s strategy – to contribute to producer profitability, sustainability and global competitiveness.