March 19, 2008

Higher US cattle slaughter rates may cut New Zealand farmers' profits
 

New Zealand beef producers might see a decrease in exports and profits as US cattle slaughter increases due to weak returns and high feed costs, according to the latest BNZ Commodities Wrap.

The high rate of slaughter in the US this year will produce enough beef supply for the domestic market, thus reducing the demand for imported beef. This might have an effect on New Zealand producers, said the report.

About 60 percent of New Zealand beef exports go to the US as low-grade manufacturing beef for the hamburger industry.

Rob Davison, economic service executive director of Meat & Wool New Zealand, however, downplayed any crisis.

Bull beef prices were still strong despite decreasing 12 percent last month. The US has a market for New Zealand beef, which is marketed as grass-fed and lean, Davison said. He added that decreasing herd sizes in the US would have positive effects on New Zealand and offset any short-term challenges.

Long term, New Zealand's prospects are good, said Davison. It can always rely on its natural pasture-based system, he added.

Adverse weather conditions and the government's decision to mandate increased ethanol production are the two challenges faced by US beef producers.

The drought is forcing farmers to cull cattle at higher rates, while the push into ethanol has caused feed costs to soar.