Australian livestock producers are currently navigating an unprecedented phase of market volatility, according to a recent report from Rabobank. The research, titled “Managing Increased Volatility in Australian Livestock Markets,” highlights extreme fluctuations in prices for both cattle and sheep that have reached record highs and lows over the past several years.
The RaboResearch division of the bank indicates that while volatility has historically been a characteristic of livestock markets, the scale and frequency of these price swings have intensified dramatically in the last five to ten years. This heightened volatility is expected to continue in the short to medium term, posing challenges for producers and stakeholders in the sector.
In the past five years, prices for cattle and sheep have not only reached repeated record highs, often exceeding previous peaks by approximately 20 percent, but have also fallen to the lowest levels recorded in the past decade. Following a rise since 2023, industry experts caution that these dramatic fluctuations will likely persist.
According to Angus Gidley-Baird, senior animal proteins analyst at Rabobank, the volatility observed in Australian livestock markets does not align consistently with trends seen in other markets, either locally or globally. This suggests that while broader geopolitical and economic factors influence market conditions, there are unique elements at play within the Australian context that contribute to this heightened price volatility.
Gidley-Baird emphasizes that while there is a clear relationship between rainfall and livestock prices—good seasonal conditions typically driving demand higher, and dry conditions leading to declines—this increased volatility cannot solely be attributed to variable weather patterns. “While rainfall and confidence are important, they don’t account for the magnitude of recent price swings,” he said.
Factors Driving Price Volatility
The report identifies several contributing factors behind the extreme volatility in livestock markets. Key among these are the growing exposure to larger geographic markets, increasing information flows, an unstable global trade environment, and rising industry debt levels.
The structure of the Australian livestock industry has evolved, with many small local saleyards closing and larger regional saleyards becoming more prominent. The emergence of online sales channels also reflects this shift. In addition, cattle are increasingly sourced from beyond local markets, with cross-border movements becoming commonplace.
Gidley-Baird notes that the greater availability of information for market participants has further amplified price fluctuations. “With information and sentiment flowing faster and further than ever before, producers are now reacting to a wider array of signals, from weather forecasts to global trade headlines,” he explained.
The report also points to an increasingly unstable geopolitical landscape, characterized by a general retreat from globalization and trade liberalization, which has further complicated livestock market dynamics. Additional factors include rising global protein consumption, increased international trade of protein products, and the spread of diseases affecting both production and trade arrangements.
Moreover, the report highlights a shift in industry structure, with a growing polarization between large and small farms. This division leads to differing decision-making processes, with smaller operations often lacking the same profit motivations or alternative income streams as larger corporate farms, which can influence their market participation and intensify price movements.
Strategies for Managing Volatility
Despite the challenges posed by this volatility, Rabobank asserts that it is not inherently negative; rather, it represents both risks and potential opportunities. The report stresses the importance of adopting strategic approaches to manage this volatility effectively.
“To navigate uncertainty with greater confidence and avoid reactive decisions that may carry long-term consequences, there is a renewed case for embedding resilience and predictability into business planning,” Gidley-Baird stated. He urges industry participants to develop strategies that enhance adaptability and promote resilience in the face of ongoing market fluctuations.
As the Australian livestock sector continues to grapple with these challenges, producers are encouraged to prepare for a landscape marked by uncertainty and to take proactive measures to safeguard their operations against the unpredictable nature of the market.
