Monday, February 26, 2024

Glimmers of hope in commodity forecasts for 2024

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Dairy and logs are two highlights in ANZ outlook.
Dr Jason Archer said the Beef Progeny Test allows breeds to be compared as well as bulls.
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Some improvement in dairy product prices and a weak recovery in log prices are two highlights of the ANZ Agri Focus bi-monthly newsletter for December.

But lamb and beef prices remain subdued as supplies are generally strong and demand is still subdued, ANZ agricultural economist Susan Kilsby said.

She has increased the milk price forecast in the current season to $7.70 and opened next season’s predictions at $8.50.

Prefacing her comments with an economic overview, Kilsby said global conditions are deteriorating, but in an orderly manner.

“Food commodities did okay through the covid pandemic but have not escaped the consequences of the monetary policy tightening implemented in most parts of the world to battle inflation.

“Demand is subdued in almost all our major export markets, though some are doing better than others.

“In this environment it is challenging to sell export products at high prices, even where there is demand.”

The overall softening in milk supply globally is helping the market rebalance and has allowed prices to firm a little.

“As yet, the price increases are not enough to encourage extra supply from the big producers, but they are helping farmgate returns.”

The supply picture looks darker for lamb and beef, especially where there is competition from other producing countries.

Australia is producing increased quantities of lamb and mutton, putting downward pressure on prices in China and the Middle East.

Its export volumes grew 9% for lamb this year compared with 2022, and by 31% for mutton.

ANZ expects NZ export lamb prices to fall below $6/kg at the farm gate by Christmas and that overall returns for the 2023-24 season will be down 20% on 2022-23 and 40% down on 2021-22.

Mutton returns will be only half of their five-year average.

Beef prices are expected to improve in coming months, which will coincide with the seasonal increase in beef supply from NZ.

Overall demand for beef is steady and is expected to remain so. 

Demand from China has improved a little, which is particularly encouraging.

“Demand from China for imported logs has lifted as the volume of logs stacked at its ports diminishes. 

“End-user demand for logs in China remains steady at relatively normal levels for this time of the year.

“This is positive given the widely publicised slowdown in China’s construction sector, as it indicates there is additional demand for softwood from other users.”

Kilsby said confidence in orchard gate prices is returning for kiwifruit but slower economic conditions have made it harder to sell NZ wine in export markets.

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