The number of lambs likely to be processed this season is estimated at 18.2 million, a drop of 4.5%, or 900,000, compared to 2019-20, with total export production of 347,600 tonnes bone-in.
“This will be the lowest lamb production on record. Confidence in the industry is subdued,” the B+LNZ report said.
“Farm gate prices have eased from recent high levels, farmers are wary of the volatility of weather events and environmental regulation is weighing heavily on morale. Forestry is also spreading into sheep farming land.
“All of these factors will weigh on future expansion of breeding ewe numbers.”
Despite this, B+LNZ says the industry handled a difficult 2020 with drought and covid-19.
“Resilience and adaptability were evident across the entire New Zealand sheep and beef supply chain,” the report said.
According to B+LNZ kill figures up to March 6, 9.6m lambs had been killed, with the South Island kill 3.9% ahead of the same stage last year and the North Island 4.5% behind. The tally overall was 0.5% behind a year earlier.
This season’s kill is estimated at 18.2m from a spring lamb crop of 22.9m lambs, which was down 1.2%, or 300,000, from the previous spring.
The key driver of the decline in lambs born was last summer’s drought on the North Island’s East Coast, which underpinned a 4.8% drop in North Island lambs born.
The number of lambs tailed in the South Island was up 1.6%.
This year’s mutton kill is 20.8% ahead, but the number of adult sheep processed is expected to be 3.7% lower than 2019-20.
B+LNZ chief economist Andrew Burtt is confident this year’s forecast kill is accurate and that stock are still on farms.
“All the evidence we’ve seen, the lamb crop surveys and macro level reconciliations point to the lambs still being there,” Burtt said.
The report warns the covid-19 pandemic and an unfavourable exchange rate will erode more than $1 billion off this season’s export returns from beef, veal and sheepmeat compared to last year.
B+LNZ’s mid-season report calculates the NZ$-US$ exchange rate is trading 13% higher than 2019-20, reducing red meat export receipts to an estimated $7.4b this year, $1.1b less than 2019-20.
Export lamb receipts are estimated at $2.9b, 14% lower than in 2019-20, driven by a 4.4% decline in production and a 10% drop in average export value.
High-value lamb cuts have been hit hard by weak demand from the foodservice sector, with growth in retail demand not sufficient to compensate.
“On the positive side, demand from China was strong for both lamb and mutton in the first quarter of the season,” the report said.
Based on an exchange rate of US72c, the average lamb price is forecast at 643c/kg for 2020-21, down 12%, and mutton at 472c/kg, down 1.8%.
For the first time, the per head prices for lamb and mutton are forecast to be the same at $122.
The high exchange rate and pandemic disruption is also responsible for a forecast 13% decline in beef export revenue to $3.7b.
NZ returns are forecast to decline 13% to $7156/t, 3% below the five-year average.
The number of cattle processed for export in 2020-21 is forecast to decline 2.6% and production will also reduce a similar amount to 661,000t carcase weight.
At a US72c exchange rate, the estimated 2020-21 average annual price for P class steer/heifer (270-295kg) is 507c/kg, 341c/kg for M class cow (170-195kg), and 518c/kg for M class bull (270-295kg).
As at March 6, the steer kill was 15.6% ahead of the same time a year earlier, the heifer kill 14.6% and bulls 2.9% – but the cow kill was 0.8% behind.
The report warns intense competition from South American beef producers could in the future dampen returns from markets such as China.
The B+LNZ report estimates that at June 30, 2020, the sheep flock was 26.2m, down 2.5% on the previous June, and the beef herd at 3.95m, up 1.6%, bolstered by an unusually large number of weaners on hand.
The number of dairy cattle is estimated to have fallen 2.4% to 6.11m.
The outlook is for wool markets to remain challenging and wool prices are expected to remain low throughout 2020-21.
