AuctionsPlus tips a 750c EYCI by end of 2023

While there are still producers with capacity in paddocks, a number of analysts and consultants now believe the herd rebuild, as a whole, is done and the Australian cattle industry is now in an expansion phase that will lead to historically high levels.

As the progeny from the rebuild flows onto the market this year, the supply situation will shift significantly and meet with far less restocker demand, keeping the market in check, they believe.

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Big online platform AuctionsPlus is forecasting an Eastern Young Cattle Indicator of around 750 cents a kilogram carcase weight by December 2023, which would mean a 10 to 15 per cent market decline.

Chief economist at AuctionsPlus Tim McRae's 2023 Australian Cattle Industry Forecast report says the rebuilding frenzy that has gripped south-eastern Australia is quickly running out of steam.

And while a bumper wet season through the heart of cattle country in central and western Queensland would be well received, any rebuilding efforts there are expected to be maintained at best, rather than accelerated.

"From a national perspective, the heavy lifting of the herd rebuild is in the rearview mirror," Mr McRae said.

He described the high hopes for United States demand, on the back of a lack of their own cattle to process as they start to rebuild from drought, as 'fundamentally correct' and historically accurate.

"However, there are still many hurdles that must be cleared before the potential is fulfilled," he said.

"The US drought needs to break, additional Australian cattle need to be processed and most importantly, US consumers need to have disposable income and jobs to purchase Australian beef."

The ability of Australian processors to increase slaughter levels through 2023 and 2024 would be crucial to the long-term viability of the producer, he said.

The degree to which labour-desperate abattoirs, which have also been notching up negative margins for years now, will be able to do that is, indeed, a widely expressed concern in cattle market circles right now.

Cattle industry consultant Ian McLean, Bush Agribusiness at Toowoomba in Queensland, said while prices had been very high in real terms recently, they were cyclical over time.

"There is an upward trend over time, so while we may not see the lows we've seen in the past, it would be reasonable to assume that the cycle will continue, albeit with a small upward trend over time," he said.

Individual producers would be best placed to focus on optimising herd productivity and ensuring they have a competitive cost base, he said.

"This will lower the cost of production, which will increase the margin wherever the level of the market is," Mr McLean said.

"Prices do have an impact on profits year-to-year, but when we look at long term data, price received doesn't explain any of the difference between the top producers and the rest.

"The top producers do have a lower cost of production though, achieved by having productive herds and a competitive cost base."

Mr McLean said cost of production was an important measure, but had a misleading name as it could result in a focus on costs, whereas productivity (having more kilograms to spread the costs over) was usually more important.

While beef operations were at different points, Mr McLean felt the herd rebuild overall was 'close to there'.

"The herd build-up has been slowed by the higher prices," he said.

"The experience of the last few years in the north is causing some producers to reassess their long term carrying capacity and perhaps run less numbers as well as changing their herd profile going forward, with more growing animals to be included to provide a discretionary buffer in dry times."

Control what is able to be controlled, consultants advise.

"Productivity gains is where it is at - always has been and always will be," farm business consultant John Francis, Agrista in southern NSW, said.

A 20pc reduction in price equates to a 30pc reduction in profit, he said.

"Over the past year, a highly productive herd in the south was selling feeder steers at $5.50. If that comes back to $4.40, and that is the 'new norm', effectively your gross profit goes from $100 per DSE (dry sheep equivalent) back to $80 DSE - the cost base doesn't change," Mr Francis said.

"So the question to ask is am I at optimum stocking rates, because if not, the opportunity loss is still very large."

Mr Francis believes what best builds resilience in drought is making money in the good years.

"The people who went from low stocking rates to optimal in one year got back on their feet fast and are benefiting now," he said.

"Those who were slower to rebuild have missed opportunities."