Animal protein analyst Blake Holgate expects farmgate beef prices to hold above the long-term average despite some softening from increasing global supply and price pressure in the United States market, especially for imported beef. Chinese and Japanese demand for prime beef should increase.
For lamb and mutton he expects prices to be similar to the elevated levels of last year. Consumer demand is strong, especially in China and the US, and global supply will remain constrained.
Challenges remain for coarse wool with prices expected to improve only marginally.
As well as favourable weather, world prices for the main NZ commodities are firm to high and while some will soften modestly this year others will strengthen.
A lower NZ dollar over the course of the year should boost export returns, the group’s head of agribusiness research for Australia and NZ, Tim Hunt, said.
It is important for the sector to spend money wisely during a good run of seasons and that looks to have happened, he said.
Many farmers had focused on reducing debt over the last year and improved cashflow has not been used to fuel a further round of land price escalation.
However, downside risks will rise this year.
From Rabobank to the IMF, economists are downgrading world growth forecasts. The language accompanying forecasts suggests much greater concerns than the economists are willing to put the numbers to yet.
China’s growth outlook is a concern for NZ agriculture and for horticulture whose market growth in recent years was achieved mainly there and in the wider Asia. The important United Kingdom and European Union markets are still to sort out Brexit and the US-China trade war could potentially worsen.
Australia’s crashing housing sector is also an issue, Hunt said.
“All of these things may be avoided in 2019 but what concerns many is the number of risks that are now in play and their interlinked nature, hence the potential for a downward spiral if one or two are triggered.”
Rabobank said softening dairy land prices through a period of sustained profitability and lower interest rates are a reminder that unusually good times are baked into land values.
“If three good years now bring softening dairy land values it is sobering to reflect what the next commodity market downturn might bring.”
