“It is no longer just local, smaller market conditions that influence buyer and seller behaviour, but rather the larger broader market that causes bigger market movements,” the report said. Mr Gidley-Baird said greater exposure to a wide selection of information for market participants was also likely contributing to price volatility. “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, which amplifies market movements,” he said. The report said an increasingly unstable geopolitical environment, including a general move away from globalisation and trade liberalisation, had contributed more recently to an unstable livestock market. “Added to this ‘complex’ is a growth in global protein consumption, increased global trade of proteins and the increased presence of diseases, which affect not only production but also trade arrangements,” Mr Gidley-Baird said. In addition, the report proposes that the livestock industry has changed in structure, including becoming more “polarised” with an increasing proportion of livestock numbers in large or small farms and less in mediumsized operations. “This leads to different decision making,” Mr GidleyBaird said. “Smaller farmers may not be driven by the same profit motives or have access to alternative income streams and larger more corporate-style operations may have different reporting responsibilities and decisionmaking processes, impacting their participation in the market and possibly adding to more pronounced market movements.” Mr Gidley-Baird said increased debt levels and financing costs may also be contributing to livestock producers making more “dramatic decisions”. The streamlining of the supply chains, particularly for cattle, may also be a contributor to market volatility, the report says, with more livestock now going through private sales – including direct consignment to feedlots or processors – reducing the volume and quality sold through saleyards. “Due to the more exaggerated supply and demand movements in these saleyard markets, we expect to see greater volatility resulting,” Mr Gidley-Baird said. And it is saleyard auction prices which are used for livestock market reporting – and on which RaboResearch’s report is based, he noted. MANAGING VOLATILITY While “volatility is not inherently negative”, RaboResearch says, and “simply represents risk, and potentially opportunities” it is likely to persist in the Australian livestock sectors for the short to medium term. And industry participants should at least prepare to manage it. “This requires a strategic approach that reinforces adaptability, promotes resilience and improves predictability,” Mr Gidley-Baird said. “There is a renewed case for embedding resilience and predictability into business planning, which can help producers navigate uncertainty with greater confidence and avoid reactive decisions that may carry long-term consequences.” 12 BUSINESS VIEW OCEANIA VOLUME 07, ISSUE 10
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