Export market demand has supported elevated prices for Australian lamb, mutton and beef through much of 2025, with favourable market conditions expected to continue into the new year, according to agribusiness banking specialist Rabobank.
In its Global animal protein outlook 2026, the bank's RaboResearch division says high cattle inventories will maintain elevated Australian beef production, while sheepmeat production takes time to recover.
Sheep and lamb production
Report co-author, RaboResearch senior animal proteins analyst Angus Gidley-Baird said Australian lamb and sheep output is expected to contract in 2026 after dry seasonal conditions hit large areas of the country's sheep-producing regions in 2024 and into 2025.
"The smaller flock, following high sheep slaughter in 2024 (the highest in over 15 years) and 2025, is likely to result in lower lamb slaughter in 2026. And improved seasonal conditions will spark efforts to rebuild the flock, further compounding the reduction in lamb slaughter," Mr Gidley-Baird said.
"Meat & Livestock Australia projects lamb slaughter to contract two per cent in 2026 after a six per cent tumble in 2025 and sheep slaughter to plunge 18 per cent in 2026 after a 15 per cent drop in 2025," he said. "Lamb production is expected to fall one per cent to 607,000 million tonnes in 2026 after a three per cent reduction in 2025."
Mr Gidley-Baird said with lower supplies, better seasonal conditions and ongoing strong demand from export markets, RaboResearch expected lamb prices to remain strong, though lower than the current historic highs.
"Given current conditions, we believe lamb prices of AUD9 to AUD10 a kilogram would be more sustainable," he said.
Beef production
Mr Gidley-Baird said successive favourable seasons have allowed Australia's cattle breeding inventory to build, and cattle were now flowing through to markets.
"Even southern areas – which experienced dry conditions throughout 2024 and into 2025 and offloaded stock at the time – are likely to have seen production levels recover in the second half of 2025," he said. "As such, 2025 production is projected to reach 2.86 million tonnes, up 11 per cent year-on-year and a new record."
Mr Gidley-Baird said with large cattle inventories in Australia, "we anticipate beef production in 2026 to remain steady at historically-high levels, reaching 2.85 million tonnes – the second highest production volume in Australia's history".
"Substantial production volumes will translate to ongoing elevated export volumes, with the US likely to remain the key market, accounting for 29 per cent of total Australian beef exports in 2025," he said. "South Korea (which accounted for 15 per cent share of Australian beef exports in 2025) and Japan (16 per cent) will remain important markets, while volumes to China (18 per cent) are expected to rise, given the ongoing tensions between China and the US."
With sizable volumes of beef in the market, Mr Gidley-Baird said, cattle prices in 2026 will depend on producer sentiment and seasonal conditions.
"We believe that cattle prices will remain close to current levels, with some potential upside given the strong US market, and that the National Young Cattle Indicator will sit around AUD 4.30 to AUD 4.80/kg. However, if seasonal conditions deteriorate and producers lose confidence, high cattle inventories and increased slaughter numbers will see prices contract," he said.
Global protein outlook
According to the RaboResearch outlook, the global animal protein industry is set to experience a slowdown in production growth in 2026, driven by both cyclical and structural factors.
Seafood and poultry will lead growth, while pork and beef production will contract. The sector faces challenges from disease outbreaks, trade disruptions and sustainability pressures, requiring strategic adaptation and technological integration from industry players.
Rising costs
RaboResearch global strategist animal protein Éva Gocsik said globally, while the bank expected feed costs to remain steady, a combination of lower protein supplies, rising volatility and trade costs and disease pressure will weigh on margins.
"Processors (in regions where supplies are limited) may face ongoing challenges around capacity utilisation, as well as trade disruptions resulting from tariffs and other protectionist measures. All of this could raise costs, pressure demand and ultimately squeeze margins. In both mature and developing markets, a focus on increasing efficiency and productivity will be critical at the farm and processor level," she said.
Price sensitivity
According to Ms Gocsik, with global gross domestic product growth projected to decelerate, consumers are likely to become increasingly price-sensitive, altering their consumption patterns.
At the same time, the rising use of glucagon-like peptide-1 agonists (GLP-1) weight loss medications is also likely to influence dietary choices.
"Price pressures within animal protein categories may lead consumers to trade down or switch between proteins, while consumers seeking protein-rich foods will potentially boost animal protein demand," she said.
Trade resilience
Despite disruptions, the Rabobank report said animal protein trade has shown resilience, with strategic front-loading, like shipments of Brazilian beef into the US, helping to sustain volumes amid volatility and shifting tariffs that are reshaping global flows.
Meanwhile, supply-demand imbalances continue to seek equilibrium, a trend that is likely to persist in 2026. Geopolitical tensions and evolving policies will continue to influence trade, but new trade agreements may provide a boost.
Disease challenges
Global disease outbreaks have also disrupted trade, squeezed margins and pressured productivity in the animal proteins sectors, the report said.
Disease outbreaks such as African swine fever and avian influenza continue to disrupt trade and squeeze margins, RaboResearch said. "Combined with emerging diseases like New World screwworm and Bluetongue, these challenges are driving greater adoption of biosecurity measures and increased focus on new approaches to managing disease pressure, though implementation remains complex," it said.
Sustainability and technology
In an uncertain operating environment, sustainability-related risks linked to climate and nature are increasingly critical, the outlook said. Regulatory momentum is pushing sustainability to the forefront of strategic planning for animal protein companies, it said.
The report said technology, particularly artificial intelligence, offers potential benefits for managing operational risks and advancing sustainability goals, though investment remains weak.
"While not all AI applications will transform the industry, strategic integration into existing workflows could spark meaningful progress in a sector that is traditionally slow to adopt new technologies," it said.
"Maintaining consumer trust is paramount. In times of heightened risk, consumers continue to prioritise animal welfare, supply availability, price, food safety and quality, and these demands are driving advancements in transparency and traceability," Ms Gocsik said.
RaboResearch Disclaimer: Please refer to Australian RaboResearch disclaimer here
