Friday, December 8, 2023

Meat prices to go higher

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Sheep meat and beef exports are forecast to each exceed $4 billion this season, just two years after passing $3b for the first time.
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Beef, lamb, and mutton prices should lift from historically high levels because of strong export demand led by China, with returns boosted by a weakening of the kiwi dollar, Beef + Lamb chief economist Andrew Burtt said in his New Season Report.

Farmgate prices are expected to rise.

Beef and veal exports are forecast to total $4.7b, a 5.9% lift over the year just finished and sheep meat to total $4.23b, a 4.9% rise.

Overall, the rise in red meat and offal returns will be $430m higher year-on-year, after a $228m gain last year and a $1.23b lift the year before. 

Lamb and mutton prices have been exceptionally strong since the 2016-17 season while beef prices are expected to rise after being mostly steady since the 2014-15 spike.

The fall in the kiwi dollar will have a large bearing on the outlook as the Reserve Bank continues to lower the Official Cash Rate.

China’s African swine fever outbreak is having a big impact on red meat demand but NZ  export growth was on a strong growth path before that became an issue. Demand growth for lamb and mutton started midway through the 2016-17 season.

China makes up about 63% of world pork consumption and has had to seek other meat proteins as a substitute.

“The growth in China’s red meat import demand is built on genuine growth as consumption has outpaced domestic production growth,” Burtt said.

The average farmgate price for lamb is forecast to reach $7.73/kg this season, a 3.5% increase, with mutton up 4.5% to $4.73/kg.

Export lamb production is expected to be steady with a minor increase in lamb numbers but carcase weights down on the 2018-19 record levels. The spring lamb crop is expected to fall slightly and B+LNZ says fewer ewe lambs are likely to be kept for breeding so more will be available for processing.

Mutton export production is forecast to be up nearly 9% with more ewes available for processing, partly because more hoggets were kept for breeding last season.

Farmgate prices across the cattle classes are expected to rise 4.9% to an average $5.27/kg this season, the increase driven by Chinese demand for processing cuts, drawing supply away from the United States.

The processing cuts are seen as a more apparent substitute for pork. Sheep meat and other beef cuts are generally in the premium market segment.

Burtt said NZ benefits from its longer, more favourable trade relationship with China ahead of larger beef exporters India, Brazil, the US and Australia.

NZ will also benefit in the short to medium-terms from signals US and Australian breeding cow herds could be entering a downward phase of their production cycles. NZ beef cattle herd numbers are expected to rise 2.6% to 3.82m.

Demand for NZ lamb will benefit from Australia being expected to enter a sheep flock rebuilding phase, weather permitting, that will lead to significantly lower production. NZ and Australia are the world’s major sheep meat exporters.

B+LNZ has forecast the nominal average pre-tax earnings for sheep and beef farms to be steady at $173,000 over the year, though that is a slight decrease after inflation. A slight increase in farm spending is likely.

Despite uncertainties over world trade NZ’s red meat customers are mainly in major world economies and demand is solid so the outlook remains positive, Burtt said.  

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