September 1, 2009

In-market prices for beef are expected to remain strong in the coming year, and exchange rates are likely to have the greatest influence on farm-gate returns, according to Meat & Wool New Zealand's New Season Outlook for 2009-10.

Uncertainty in the global economy, and the timing and strength of New Zealand's economic recovery make it difficult to forecast where the New Zealand dollar will go over the next year and how farm-gate returns will be affected, said Rob Davision, Economic Service Executive Director of M&WNZ.

Davision said they expected the New Zealand dollar to remain volatile over 2009-10, and it has appreciated in recent months compared with the continued weakness of the US dollar.

There is also the concern that the New Zealand dollar may be following the Australian and Canadian exchange rate trends weighted towards the equity markets, oil, mineral and metal commodity trends, instead of New Zealand's soft agricultural commodities, he said. 

Based on an optimistic exchange rate "mid-point" for the year of 63cents/US dollar, beef prices are estimated to be down 11.7 percent, while a higher exchange rate for 2009-10 centred on 67 cents/US dollar and its associated cross rates would see beef prices drop 17.1 percent on-year, Davison said.

Based on a 63 cents/US dollar exchange rate, gross farm revenue at the farm gate is forecast to decrease 6.7 percent or NZ$300 million to NZ$4.25 billion, while total expenditure is forecast to decrease 1.9 percent.

Sheep and beef farm profit per farm is expected to drop from NZ$56,600 to NZ$39,900.

US$1 = NZ$ 1.45452 (Sept 1)