Wednesday, April 24, 2024

Beef rosier, but sheepmeat outlook still thorny

Neal Wallace
SFF chief executive Dan Boulton says beef will start to pick up by midyear.
Reading Time: 2 minutes

Beef prices are expected to recover in the coming few months but sheepmeat may take a bit longer, Silver Fern Farms Ltd chief executive Dan Boulton says.

He said markets remain tough as they did for much of last year, and this was the main reason for SFF reporting a loss of $24.4m after tax for the year to December 31, reflected in the $497m reduction in turnover at $2.78 billion.

The loss compares to net profit after tax in 2022 of $198.2m from $3.27bn of revenue. That year SFF paid a $76.9m dividend; none will be paid this year.

Boulton said prices for beef and lamb fell sharply last year, and while market prospects remain tough, returns for beef are likely to improve in the middle of the year. Sheepmeat returns will stay flat for the remainder of this year.

Venison prices are likely to stay unchanged, he said.

Beef prices are improving on the back of stronger demand out of the United States and there are tentative signs of improved sheepmeat prices, but they are not yet sufficient to significantly influence farmgate prices.

Boulton said in an interview that had SFF not embarked on its market-led strategy five years ago, the size of the loss would have been greater.

“If we were fully exposed to the commodity cycle and traders and had not invested in the end consumers, then the result would have worse.
“We have some protection from creating incremental value but we need to go after it faster.”

Some company programmes this year have been delayed or slowed and the focus shifted to managing costs and operating efficiently. 

This has been helped by not having the labour shortages of the past few years but also by the $70m invested last year in improving efficiency and performance in its processing sites.

That was part of $106m of capital expenditure last year. Boulton could not say what would be spent this year as it will be determined by market strength and income.

A variety of company targets have been set this year with priorities to maximise returns to farmers and keep costs under control, but given its reliance on overseas markets, Boulton said, that will also be determined by market conditions.

About 55% of SFF’s throughout is beef and about 45% sheepmeat. 

He remains confident that global demand for animal protein will continue to grow and that the company’s market-led strategy is the best mechanism to not only remove market volatility but also to benefit from that growth.

The company’s balance sheet is strong after five years of favourable trading.

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