Friday, March 29, 2024

Gloss comes off a good season

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The gloss is quickly fading on what was shaping to be an exceptional season for farmers.
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Export prices are still high by historic standards but a perfect storm of unfavourable weather and coronavirus measures in China are putting pressure on export and store prices.

Drought-like conditions in the North Island and wet in the south of the South Island combined with falling export prices have seen store prices collapse.

AgriHQ analyst Nicola Dennis says export lamb prices are likely to slip a further 20c/kg this week as exporters manage the impact of coronavirus.

In recent weeks the schedule has fallen each week by about 10c/kg for lamb and 20c/kg for beef.

Dry weather and uncertain export prices have in the last three weeks pushed down North Island store lamb prices by 50c/kg to $2.70 to $2.80/kg.

Few store cattle are being traded but some North Island farmers have weaned calves early and those cattle are selling for $600 to $630/head, back almost $200/head on a few weeks ago.

“Most regions still have a fair bit of roughage on the hills so it isn’t so dire and cattle are in okay condition,” Dennis said.

People are slowly returning to work in China but exporters say ports remain congested, distribution networks are disrupted and factories and workplaces are short of staff as the government encourages people to stay home to slow the spread of the virus.

The Chinese red meat market is still quite confusing and New Zealand exporters are responding according to their own circumstances and markets.

Some importers are buying product that requires little processing and can easily shifted to assist with their cashflow while others are inquiring about placing normal orders.

Silver Fern Farms chief executive Simon Limmer says after some initial disruption, the company has balanced cold storage with processing and product mix to resume normal processing.

Chinese businesses are starting to operate at restricted capacity.

“People are still under movement restrictions and in many cases cannot get to work or back home, potentially until at least until February 9,” he said.

Access to customer facilities and retail outlets remains a pinch point.

“This will be having an impact on both retail supermarket and food service sales in restaurants though the extent of this disruption is not yet known.”

Alliance sales manager Shane Kingston says some Chinese provinces have instructed residents to shop only every second day to ration food and prevent the public movement of people.

Company inventory is better than at this time last year, which means processing is not constrained.

Alliance livestock and shareholder services manager Danny Hailes says stock flows through plants are steady but dry conditions mean the Levin, Dannevirke and Nelson plants are especially busy.

Anzco chief executive Peter Conley says the company has stopped producing to meet planned orders for its Chinese customers to allow them to manage their situation.

“It is important to remember that our customers are also facing an unclear way forward as they manage their own in-market supply chains and the immediate demand challenges and we need to support them as best we can.”

Product is being diverted to other markets but Conley hopes supply chains in China will begin to free up as people return to work next week.

Dairy exporters have not had any significant disruption in China, Dairy Companies Association chairman Malcolm Bailey says.

“China appears to be mobilising quickly and trying to keep trade flowing as much as possible.”

Potential disruption could come from either lower product prices on Global Dairy Trade or delays in the movement of contracted goods.

“The government has called for mid-sized supermarkets to remain open. But most restaurants are closed and that impact will be felt over the coming two, three, four weeks on NZ suppliers if those restaurants stay shut.” 

The ANZ Bank is bit more pessimistic about the virus impact on trade, warning that despite constrained global supplies of dairy and meat, weaker demand could see the sun setting on a golden period for food exporters.

It has lowered its milk price forecast for this season to $7.15/kg MS and expects an easing in lamb and beef values, adding those values should still be ahead of last year. On Friday NZX cuts its milk price forecast to $7.18/kg MS.

A2 Milk chief executive Geoffrey Babidge says the company has not experienced material changes to its operations but has limited the movement of its staff in China.

The company has donated cash to the Shanghai Red Cross, given product for distribution to medical teams and those affected by the virus and donated $1 million to researchers in Australia trying to find a vaccine.

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