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Good Prices Continue for NZ Beef

15 February 2012

NEW ZEALAND - Expectations are for a small lift in export volumes and continued good prices relative to recent years. This will be moderated by the strength of the New Zealand dollar, particularly against the Euro and British pound.

B+LNZ Economic Service Director Rob Davison says the Mid-Season Update contains few surprises.

"Statistics New Zealand's provisional livestock result, released in December, showed sheep numbers were down 4.3 per cent – a stronger decrease than the 2.1 per cent previously estimated. We have revised the export lamb slaughter on this basis. With fewer ewes, it's down 4.1 per cent from earlier estimates, to 19.7 million. The global lamb supply continues to remain tight overall."

This summer has been excellent for pasture growth around most of the country, reflected in high seasonal weights for lamb and beef, says Mr Davison. "Rarely do we see such good pastoral conditions and international prices at the same time."

Lamb prices for the season are expected to average $115 per head, slightly down (-2.2%) on 2010-11's record high. Last year saw prices climb as the season progressed. This season, expectations are for offshore prices to remain at good levels, though the estimated stronger New Zealand dollar against the Euro (+7.1%e) and British pound (+3.2%e) softens the price outlook at home. The recent strengthening of the NZ dollar against the US dollar is also a concern.

Mr Davison says global mutton supplies remain tight. Australia is expected to ship 4 per cent more than last year (+3,300 tonnes) while New Zealand supplies are estimated to fall 30 per cent (-31,800 tonnes). This decrease follows last year's exceptionally high mutton off-take, which was underwritten by record prices. A similar off-take this year would cut sheep numbers and is not expected.

The outlook for beef production is a lift in exports of 4.5 per cent, with the cattle slaughter up 1.7 per cent and heavier weights (+2.8%). The heavier weights reflect the excellent pastoral conditions so far, expected to continue into the autumn.

North American price prospects are underwritten by the US cattle herd falling 2 per cent to 90.8 million, its lowest level since 1952. With slow economic growth, the US hamburger boom continues. This is positive for the 50 per cent of New Zealand beef exported to North America.

Overall, the outlook is for farm gate export beef prices to remain similar to last year. However, there is concern about the current strengthening trend of the Kiwi against the Greenback, which lowers the New Zealand price.

Shorn wool production falls in line with decreased sheep numbers but this is offset by good pastoral conditions. An expected increased clip per head will leave wool production down 2.1 per cent on last year. Average wool auction prices for the season are expected to be similar to last year.

Mr Davison says the country's "average" sheep and beef farm profit before tax reflects the positive price outlook for meat and wool relative to recent years.

"Profit for 2011-12 is estimated at $133,800 per farm, up 17 per cent on last year. In inflation-adjusted terms this will be the highest profit since 2001-02, which in today's money terms was higher, at $156,200 per farm.

Back in 2001-02 the high farm profit was underwritten by a low US exchange rate – 43 cents to the NZ dollar. This year's farm profit reflects strong international prices that have so far outpaced the strong exchange rate relative to 12 years ago (80-plus cents to the NZ dollar).

Mr Davison says the current La Nina summer is expected to deliver wetter conditions to eastern Northland, coastal Bay of Plenty and Gisborne, while it could become drier in the south and southwest of the South Island.

TheMeatSite News Desk

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