Friday, March 29, 2024

Lamb, beef export prices hold up

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Beef and lamb exports are each expected to exceed $3 billion in receipts for the second year in a row. Lamb exports are expected to remain at about $3.1b and beef to fall slightly to $3.4b, Beef + Lamb New Zealand says in its new season outlook.
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After exceptionally strong farmgate prices for lamb, mutton and beef in the September export year, the farmer organisation says lamb prices should remain relatively steady to slightly lower in NZ’s main export markets and be topped up by the easing of the kiwi dollar. Beef returns per tonne could be slightly lower overall.

Currency has a large bearing on the sector’s outlook with 70% of red meat exports traded in US dollars, B+LNZ chief economist Andrew Burtt said.

His forecasts are based on a US$0.67 exchange rate over the course of the season. The dollar is below that figure now and major bank currency strategists are forecasting further easing over the year ahead.

Beef exports are forecast to fall about 3% in volume to 45,000 tonnes next export year. That is about 2.51 million head of cattle and follows a near 10% lift this season because of an increase in cow and bull processing. 

Farmers will be rebuilding their herds, especially in the South Island, Burtt said.

Despite this season’s kill the national herd is estimated to have increased nearly 2% to 3.68m head on June 30, from a year earlier. 

Slightly lower lamb exports are a follow-on from a reduced lamb crop though that will be partly offset by a slight rise in carcase weights. The lower lambing rate followed the big cull of older ewes last summer as farmers sold into the high mutton procurement and export prices.

That has left a smaller and younger ewe flock and B+LNZ said there could be a 17% fall in mutton export volumes. The greater number of ewe hoggets kept for breeding this year reflects farmer confidence in ongoing sheep production, he said.

A 1.2% increase in the FOB lamb value per tonne is forecast, with the dollar’s help.

At the US$0.67 mid-rate figure B+LNZ expects an average lamb price of $7.12/kg over the 2018-19 season, marginally higher than the estimated  (inflation-adjusted) value of $7.08/kg this season.

Mutton exports are forecast to be down 15% by FOB value to $466m. Allowing for the lower volumes, the FOB value per tonne is expected to be 2.2% higher. At the US$0.67 mid-rate for the kiwi dollar, the forecast average mutton price is $4.30/kg, up from an estimated inflation-adjusted price this export season of $4.17/kg – a 45% jump over the previous year.

For beef, the currency forecast of US$0.67 is expected to provide  an average 2018-19 farmgate price of $5.25/kg for a 270kg-295kg steer or heifer. For 170kg-195kg cows, including many cull dairy cows, the price is tipped at $3.98/kg and a 270kg-295kg bull at $5.03/kg.

Burtt said the uncertainty and breakdown of trade relationships are hanging over the recent global economic upswing but that growth is still expected to be about 3.9% for 2018 and 2019 though the rate of expansion might have peaked in some major economies.

B+LNZ estimated total sheep numbers on June 30 to be 27.3m head, nearly 1% lower than a year earlier. 

Total dairy cow numbers were estimated at 6.6m head on June 30. The South Island had 40% of the dairy herd, up from 35% 10 years ago, Burtt said.

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