Did Australia’s cattle industry have a ‘chronic overreaction’ to El Niño?

Whether it is the stock market, housing market, or livestock market, when confidence leaves it can have a big impact on prices. 

That was how analyst Tim McRae summed up the cattle market last year when prices plummeted off the back of news that foot-and-mouth disease (FMD) had been found in Bali.

“Confidence is a funny thing,” he said.

Cattle prices have continued to slide in 2023, but it seems FMD fear has been replaced by a fear of drought.

The Bureau of Meteorology announced an El Niño Watch in March, an El Niño Alert in June, before officially declaring an El Niño in September.

Cattle Australia deputy chair Garry Edwards said cattle prices were undervalued and spending all year talking about El Niño had not helped.

“My personal opinion is that there’s been a chronic overreaction to the [weather] bureau announcing El Niño,” he said.

“I think the bureau potentially go earlier and stronger in those [El Niño] announcements than they might have in the past, which may force or encourage producers to make more significant and dramatic decisions earlier than what they’d [previously] make.”

Mr Edwards said there were no global indicators that supported Australia’s cattle prices being so low and he expected prices to improve over the next two to six months.

What can be learnt?

Meat and Livestock Australia chief executive Jason Strong said cattle prices had fallen for a few reasons, but agreed the “weather conversation” had played a role.

“This prospect of El Niño has been discussed since very early in the year,” he said.

“When it got declared it probably carried more weight in people’s thinking than it should have.”

He said there was no easy answer, but it was important for the industry to reflect on how it made decisions based on the vast amount of weather and market information available.

“The lesson for us is that people are going to respond to this information much quicker than ever before, so how do we make sure there’s better context around it and do that quicker,” Mr Strong said.

According to the Bureau of Meteorology, Australia had its lowest September–October rainfall period on record.

Rainfall in November though has brought relief to a number of regions and, in a sign of some confidence returning to the cattle market, the National Restocker Heifer Indicator has lifted more than 50 per cent since November 1.

The official summer outlook will be released by the bureau on November 30.

Watch ABC TV’s Landline at 12:30pm on Sunday or on ABC iview.