A LEADING market researcher says there are two main factors that will drive Australia’s cattle market in the near future – factors he labelled the two W’s.

RaboResearch general manager for Australia/New Zealand Stefan Vogel.

RaboResearch general manager for Australia/New Zealand Stefan Vogel addressed a lunch at last week’s Ekka Beef Week in Brisbane, telling crowds that weather and war are currently the two big market drivers the Australian beef industry should be watching.

On the weather side, a typically dry weather bearing El Nino has been declared and, on the war side, conflicts in the Middle East and Ukraine are showing no signs of slowing down.

Mr Vogel said the two wars had highlighted Australia’s reliance on other countries for key agricultural inputs and how susceptible the agricultural industry is to geopolitical tensions.

He highlighted roughly 25 per cent of the world’s urea moves through the Strait of Hormuz, which continued to see very little movement.

“If you look at urea prices, prices are close to levels before the war started,” Mr Vogel said.

“However, in Australia we are still 30 to 40pc higher, depending on where you look, because we were managing through our inventory.

“That is the real problem for us, we have to buy stuff expensive in the world market and then prices drop. That is really hard for import companies to manage.”

Mr Vogel predicted phosphate and sulphur prices would remain very high until the Strait of Hormuz opens.

“The outlook is that Australia will continue to get the volumes it needs but will have to pay the high prices for it,” he said.

War and fuel

Unfortunately fuel falls into the same category. Mr Vogel expects Australian farmers will have to continue to pay higher prices for diesel, when compared to other major beef producing countries.

“More than 80pc of our diesel is imported. We usually take it from Korea, Singapore, Malaysia – these countries have massive refineries, much bigger than any of the ones we have ever had here,” he said.

“We have seen that Australia can get the fuel that we need but compared to all other competitor countries in the world, be it the United States, Brazil, Europe, everybody had a better fuel security than we did.

“As a result, we have paid substantially higher prices than any of the other big grain and beef producing nations in the world.”

Weather and war continue to impact grain prices

Another factor that indirectly impacts the cattle markets is grain prices, as they impact the equation for feedlots. Mr Vogel said weather and war were driving this market as well.

“Western Australia, South Australia and Victoria had a good start to the season, it has been patchy in New South Wales and Queensland,” Mr Vogel said.

“We don’t know how strong the El Nino might be and if it hits us before the harvest or not. Overall, I think Australia is looking at an adequate crop it will just be the dry in Qld that will impact supply.”

Adverse weather conditions have been impacting crops across the world, with heatwave conditions in Europe reducing some of its wheat and corn crops and dry conditions slightly reducing the crop in the Midwest of the United States.

Mr Vogel said the bigger concern for grain prices was the escalation of the war between Ukraine and Russia, countries which export 95pc of their grain by ship.

“Russia exports between 60 and 70pc more grain than we do in Australia, so they are a massive exporter of grains in the world market,” he said.

Ukraine has attacked a few ports in Russia, while Russia has attacked the only operational port in Ukraine, which has blocked the flow of grain onto the world market.

“The grain is there, it just can’t reach the market as quick as the market wants, so that has lifted the prices. And the question now is – when can that grain come to the market and how slow will it be?” Mr Vogel asked.

Good news is protein trend is here to stay

Despite the increased volatility impacting inputs for Australia’s beef industry, Mr Vogel said demand for Aussie beef did not look like slowing any time soon.

While meat consumption has risen around the world, beef production has declined and Australia is in a good position to fill the gap.

“Our outlook for the next 18 months is that the global supply of beef in the world will slightly decline from last year’s levels,” Mr Vogel said.

“Brazil will, in our view, produce less in the next couple of months compared to the years before. Australia and New Zealand probably still producing a little bit more and the rebuild in the US is relatively slow.”

Australia has emerged as the number one global beef exporter to the United States and consumption for beef is expected to remain strong.

“We think that the US will remain a strong importer for the remainder of this year, for most of 2027 and will slowly start reducing the import volumes in two-three years’ time. Although it will still import sizable volumes, just not close to the peak where we are right now.”

Mr Vogel explained the increase in GLP-1 weight loss drugs like Ozempic was also driving consumers towards red meat and there had been significant growth in the use of those drugs in the US, Asia and domestically.

“The weight loss drugs have become cheaper, they now come in pill form, so they are more accessible to a wider group,” he said.

“In the US the latest data is 12pc of the population is using it. 12pc of 330 million people – that’s more people than we have in Australia and New Zealand combined.

“But when you take those weight loss drugs, obviously the intention is to lose fat, but you also reduce your muscle so to counter the muscle loss, you need to improve your intake of proteins.”

He pointed out that when one member of a family is moving to a high protein diet associated with GLP-1 drugs, they often bring the rest of the family with them.

Make America healthy again helping increase beef consumption

Mr Vogel explained the other factor helping increase meat consumption in the US was the changes to the food pyramid, which may not have changed how the average consumer eats, but has influenced meals provided by the US Government.

“It changes how the school lunches are done, it changes how the military lunches are done, it changes how the hospital lunches are done. So with that, we expect that meat is still a strong consumption part in the US.”