February 16, 2012

Good export, price outlook for New Zealand beef

New Zealand beef industry expects a small rise in export numbers and extended good prices compared to recent years, despite the strength of the New Zealand dollar.

B+LNZ Economic Service Director Rob Davison says this summer has been excellent for pasture growth around most of the country, reflected in high seasonal weights for lamb and beef. "Rarely do we see such good pastoral conditions and international prices at the same time."

The outlook for beef production is a lift in exports of 4.5%, with the cattle slaughter up 1.7% and heavier weights (+2.8%). The heavier weights reflect the excellent pastoral conditions so far, expected to continue into the autumn.

North American price prospects are underwritten by the US cattle herd falling 2% to 90.8 million, its lowest level since 1952. With slow economic growth, the US hamburger boom continues. This is positive for the 50% of New Zealand beef exported to North America.

Overall, the outlook is for farm gate export beef prices to remain similar to last year. However, there is concern about the current strengthening trend of the Kiwi against the Greenback, which lowers the New Zealand price.

Davison says the country's "average" sheep and beef farm profit before tax reflects the positive price outlook for meat and wool relative to recent years.

Profit for 2011-12 is estimated at NZD133,800 (US$111,100) per farm, up 17% on last year. In inflation-adjusted terms this will be the highest profit since 2001-02, which in today's money terms was higher, at NZD156,200 (US$129,700) per farm, he adds.

Back in 2001-02 the high farm profit was underwritten by a low US exchange rate – US$0.43 to the NZ dollar. This year's farm profit reflects strong international prices that have so far outpaced the strong exchange rate relative to 12 years ago (80-plus cents to the NZ dollar).

Davison says the current La Nina summer is expected to deliver wetter conditions to eastern Northland, coastal Bay of Plenty and Gisborne, while it could become drier in the south and southwest of the South Island.