Export opportunities on the rise

Strong increases for both lamb and beef prices for the coming year are being forecast by Meat & Wool New Zealand’s Economic Service.

Lamb prices at the farmgate are expected to be up 38% on last year and beef prices are forecast to increase up to 11%.

Meat & Wool New Zealand chairman, Mike Petersen, said the Economic Service’s mid season update signalled a continuation of the improved pricing farmers have seen, compared with last year. Both lamb and beef returns are on a positive trend, which looks set to continue (in contrast to other agriculture exports).

The update forecasts that the average profit for sheep and beef farmers in 2008-09 will remain low, however there is certain to be an improvement on the 50-year low experienced last year. Farm profit before tax was $16,700 in the 2007-08 year and is forecast to be $45,600 in the 2008-09 year.

According to Economic Service executive director, Rob Davison, depreciation of the NZ dollar has been positive for the export sector, as lower interest yields and greater global financial uncertainty, has made investors risk averse to investing in other currencies.

“The more export favourable NZ dollar has already had a positive effect, and underpins higher farm-gate returns for 2009.

“Total sheep and beef farm earnings at the farm gate are estimated to increase by $500 million to $4.4 billion – a positive for the economy.”

Davison expects lamb prices at the farm-gate to average $80 per head in 2008-09, compared with an average of $58 per head last year. While this 38% increase is welcomed, lamb production is down 23% this year as a flow on from the drought, and (to a lesser extent) the expansion of the dairy industry onto sheep and beef land. There is also the issue of increased cropping.

“Overall, the increase in lamb price is due to tighter global supplies of lamb from NZ, Australia and Europe, as well as the depreciation of the NZ dollar particularly against the Euro and the US dollar.”

Davison estimates that farmgate beef prices will be positive in the short-term, and could firm further into 2010.

“The price increase for beef will be underpinned by the depreciation of the NZ dollar and strong US demand for manufacturing beef as consumers trade-down to lower value market segments such as hamburgers.”

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