Australia Agribusiness Outlook 2023: Continuing on a Successful Path

Australian agriculture has enjoyed multiple fantastic seasons in a row. Still, 2022 stood out with high, often record, commodity prices and strong, in parts record, production volumes. This has put the farming sector in a healthy position to master 2023, which is likely to deliver good, not record, prices in an environment with elevated costs and a global recession.

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Report Summary

The war in Ukraine will likely drag on, impacting Ukrainian and Russian production and exports. Australia will have to continue to work on keeping alternative destinations accessible to scale them in case of trade disruptions.

Australia is likely to avoid a recession, but inflation remains a concern locally and globally. Heightened interest rates and inflation are tightening the belts of consumers.

Fertiliser prices globally have fallen from their 2022 highs, but are still well above historic levels, labour challenges will persist, and reliability on freight rates is still below the norm. 

Here are the main highlights for some of Australia’s key commodities. The full report provides an overview of the developments to watch.

Wheat and Barley: A continuation of historically low global grain stocks and an accelerating rate of political involvement in the grain trade makes ‘what to watch’ just as, if not more, important than a base case price outlook. Locally, the 2023 pricing trajectory will be divided between the west and east coast.

- Canola: We have entered 2023 with considerably more canola than last year, globally and locally. April to May, and October to December may see increased demand for Australian canola. However, the rest of the year appears less exciting.

Dairy: Dairy farm margins remain positive heading towards the 2023/24 season. Recovery from flooding will be ongoing for affected farms. Ample availability of supplementary feed and irrigation water provides a solid footing for the sector, with favourable and less disruptive seasonal conditions welcomed.

- Beef: Production is on the rise in 2023, as increased cattle inventory becomes productive. Consumer markets will be softer amid slower economic conditions and prices, while remaining historically high, will retreat from their record levels and stabilise.

- Sheepmeat: 2023 will see lamb production push further into record territory. Softer consumer demand is likely to impact lamb more as a premium-positioned product but new trade agreements and recovery in China provide possible upside.

- Cotton: Cotton prices are expected to stabilise in 2023. Australian production is forecast below record 2022 levels with excessive rainfall and cooler summer conditions reducing plantings and yield. Soft consumer demand may see upside from increased activity in China post their relaxation of Covid policies.

- Wool: The wool price outlook is positive for 2023, driven by increase in fine-micron values. Consumer sentiment in major retail markets is set to improve, driving greater demand. Production is set to continue its growth trajectory on national herd increases and continued favourable conditions. 

- Sugar: With Brazil cane production expected to recover and ethanol prices below sugar parity, surplus will weigh on the sweetness of prices in 2023.

Consumer Foods: Australian consumer behaviour will continue to adapt to cost of living pressures and falling real wages and will remain a key theme through 2023. Food markets will outperform most non-food discretionary categories, but food and beverage companies will need to ramp up efforts to offer affordable options.

- Farm Inputs: Overall supply and demand is adjusting itself to a new, new normal, and the price soars are dissipating. In early 2022 ‘fear’ was in the air, while 2023 kicks off with ‘hope’ as the balance is more favourable for supply. Still, purchasing by farmers in the northern hemisphere has been slow, and planting starts soon.

- FX/Interest Rates: Australia’s December inflation release solidified the RBA’s decision to raise rates by 25bps this week – and more increases will follow. Boosted by the reopening of China, we expect the AUD to perform well this year relative to a basket of G10 currencies.

- Oil/Freight: Australian diesel prices remain high. Europe’s warm winter has caused gas prices there to plummet, and urea prices remain sensitive to gas prices. 2023 will be the downcycle in the container shipping market, with recession-induced falling demand at a time of capacity improvements.

  • Stefan Vogel

    General Manager – RaboResearch Australia & New Zealand
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  • Emma Higgins

    Senior Analyst – Agriculture
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  • Genevieve Steven

    Analyst – Agriculture
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  • Angus Gidley-Baird

    Senior Analyst – Animal Protein
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  • Dennis Voznesenski

    Analyst – Agriculture
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  • Pia Piggott

    Analyst – Associate Analyst
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  • Michael Harvey

    Senior Analyst – Dairy & Consumer Foods
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  • Vítor Caçula Pistóia

    Analyst – Farm Inputs
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  • Edward McGeoch

    Associate Analyst – Agri Commodities
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