Saturday, December 9, 2023

Show us the money

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Bull beef prices in the big United States market have hit record levels but New Zealand farmers are not seeing the full benefit in their meat company price schedules.
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The 95CL in-market indicator has risen to US317c/lb, just one cent below its all-time record high, set in September 2014.

However, as the NZ dollar is now lower against the USD than in 2014 that market indicator is at a record high in NZ dollar terms at $11/kg.

Only four weeks ago the 95CL indicator was at $8.80 and this time last year it was $6.30.

Meat companies have set the new North Island bull beef schedule for this week at $6.40, a rise of 10c on last week.

Eagle-eyed Northland farmers have already pounced on the extraordinary overseas prices and the dwindling proportion that is being reflected in their meat schedules.

The AgriHQ procurement indicator, which is the schedule as a percentage of the US 95CL price, sits at 60%, whereas this time last year it was 80%.

“The meat companies are making a killing right now,” Kawakawa dairy beef farmer Geff Cookson said.

“If we were getting 80% of the US price the schedule would be $2.50/kg higher – that’s $750 a beast more.”

Cookson finishes more than 1000 rising two-year bulls every year and markets most of them between now and Christmas.

While $2000/head is a very good return the prospect of something closer to $3000 has his whiskers twitching.

As a subscriber to the AgriHQ weekly market insights he closely watches the procurement indicator along with the schedule movements and historical comparisons.

“I know that meat companies only break even at 80% and that competition between companies has ensured fair-value schedules most of the time.

“Farmers would be happy with 75% but 60% is daylight robbery.”

Fellow Northland farmer Geoff Crawford said the $2/kg-plus shortfall is a big disparity between in-market prices and the local schedules.

“If beef farmers were getting $8/kg, for example, it would stem the tide towards forestry and ease the burden of compliance.”

AgriHQ beef analyst Reece Brick said the US manufacturing beef prices have rocketed in the past few weeks.

Very strong competition from China has generated buy-at-any-cost behaviour in the States.

“Our contacts are wary of what could be an over-heated market.

“Farmers would be happy if the schedules went up 40c a week but if they went down again by that much there would be hell to pay.”

Brick said AgriHQ tracks the spot prices in the US market and NZ companies may have sold forward at lower levels.

As well they want the bull prices not to get out of kilter with steer and heifer prime beef values.

For most of the past four years the procurement indicator sat around 80% and only recently has it fallen, he said.

“Not only is the US market catching up with China, the schedules are still catching up.”

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