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7 February 2011

Sheep and beef prices up and expected to remain strong

Beef + Lamb New Zealand’s (B+LNZ) Mid-Season Update for the sheep and beef sector reports marked increases in offshore prices, despite drawn-out recoveries from recession in North America and the European Union.

While the export price increases are being moderated by the continuing strength of the New Zealand dollar, lamb, mutton, beef and wool prices are all up on last season.

B+LNZ Economic Service Director Rob Davison says the Mid-Season Update contains few surprises.

“All indications are that lamb prices will remain strong and stable for some time to come, thanks to tight global supplies. We expect 19.3 million head of lamb to be exported, which is a drop of 7.7 per cent compared to last season. This significant decrease is due to the adverse weather conditions during spring lambing. Despite the lower volume of lambs, higher prices will see export receipts for the season total around $2.6 billion – much the same as last year.”

Mr Davison says mutton prices are up, a consequence of the global shortage of sheepmeat. Farmers experienced record returns for mutton in the December 2010 quarter.

“The high prices were largely the result of Australian exports being down 24 per cent in 2009-10. They are estimated to fall a further 11 per cent this year – a combined decrease of 46,000 tonnes. This compares with New Zealand mutton shipments last year of 63,000 tonnes.”

Limited supplies of cattle from Australia and New Zealand, combined with robust demand for ground beef in the US, are keeping imported lean beef prices strong.

“The exchange rate will determine how this demand translates through to farm-gate prices. It is predicted that 2.17 million head of cattle will be processed this season, 3.5 per cent less compared with 2009-10, when the slaughter tally was high because of drought conditions in the north.”

Wool prices are predicted to improve 40 per cent for the year ended June 2011 – the highest wool price since the 1989-90 season. This is a result of wool inventories being run down in wool-buying countries in Europe and North America when they were trying to reduce debt. However, the woollen goods manufacturers in these countries now need to purchase wool to fill orders and this is driving the optimistic wool price outlook.

Mr Davison says the country’s average sheep and beef farm profit before tax reflects the positive price outlook for meat and wool.

“The average profit per farm for 2010-11 is estimated to be $67,600, up 11 per cent on last year. This is the highest farm profit since 2004-05, when the average profit per farm was $87,800 in inflation-adjusted terms. This year’s profit will be achieved as a result of farmers keeping a tight rein on farm expenditure, which is estimated to be up 2.2 per cent on last year – less than the 3.1 per cent increase in prices paid for farm-inputs, such as fertiliser and cartage.”

Read the full Mid-Season Outlook Update on www.beeflambnz.com

ENDS

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