January 19, 2009

New Zealand's cattle farmers can expect robust price increase for beef over the next few months, according to agricultural economists.

Beef prices are forecast to increase 11 percent, with total cattle farm gate earnings estimated to reach US$4.4 billion, said economist Rob Davison.

There had also been an increasing incursion of the dairy industry onto beef land, both directly and through rising use of beef farms to grow fodder for dairy cows.

Beef returns were on a positive trend that looked set to continue, in contrast to other agricultural produce such as dairy where returns have dropped by more than a third on last year's record levels, said Meat and Wool New Zealand chairman Mike Petersen.

The industry board expects that the average profit for beef farmers in 2008-09 will remain low, but will be better than the 50-year low experienced last year.

Before-tax farm profit was US$16,700 in the 2007-08 but is expected to be US$45,600 in the 2008-09 year.

Farm revenue may be higher than last year but farmers need to keep an eye on their expenditure as business costs have been rising, said Davison.

Fuel and interest rates had dropped but overall farm input costs were expected to increase 6.9 percent this year. Last year's low income had also left many farms with increased debts to service.

Davison forecasts that farm-gate beef prices could strengthen into 2010, supported by the falling exchange rate and strong US demand for manufacturing beef as consumers trade-down to lower-value products.