October 16, 2007

 

New Zealand's beef shipments to US sluggish on booming dairy sector

 

 

New Zealand's beef exports to the United States continue to fall as cows are held back to supply the country's flourishing dairy industry, according to the latest agribusiness review by Rabobank.

 

Beef exports to US in September dropped to 8 percent on the previous year worth US$707 million from US$782 million on the same period. The exports made up 44 percent of total beef exports.

 

Rabobank senior analyst Hayley Moynihan said lower supply was the main reason for the drop. Retention of cattle to increase beef herd as well as holding back dairy cows were largely attributed to the decline.

 

Fonterra is forecasting a record payout of US$6.40 per kilogramme of milk solids this year and 90 percent of dairy farmers surveyed for a Rabobank/ Nielsen survey in August expected income to rise during the next year.

 

However, the higher exchange rate had hit strong international dairy prices by between 2 and 7 percent in New Zealand dollar terms.

 

New Zealand sends dairy cows to the US for manufacturing beef, where there was increased competition from Uruguay, Moynihan said.

 

Farm gate bull beef prices were down 7 percent on last year, having strengthened during September before being hit by higher exchange rates towards the end of the month.

 

Total beef export receipts for the year ending September were US$1.6 billion, down from US$1.73 billion the previous year.

 

Meat & Wool's executive director of economics, Rob Davison, said stronger exchange rate with the US dollar was also another reason for the decline.

 

Davison said, New Zealand dollar is at US66c last year and now, its around US75c which is quite a big appreciation.

 

Meanwhile, Rabobank said lamb schedule prices paid by processors to farmers lifted slightly in September, but were still 12 to 14 percent lower than the previous two years, with the international price for some cuts down about 5 percent and currency movements generally unfavourable.

 

Usually there would be a seasonal lift at this time of year, Moynihan said.

 

Australian producers had culled more lambs than normal because of drought, affecting export markets where prices had been relatively flat during the last year to 18 months.