Each spring B+LNZ releases its New Season Outlook and this year it sees beef and lamb export receipts totaling $4.7 billion (US$3.4 billion), 1.6% less than last year. The decrease predominantly reflects a 3.5% decrease in meat shipments to world markets, while lamb prices per tonne held on last year and beef prices lifted 3.0%.
Because New Zealand exports 82% of its beef and 92% of its lamb, it’s the international market prices that drive the sheep and beef sector as it is those prices that dominate, said B+LNZ Economic Service Director Rob Davison.
“In terms of lamb production, New Zealand’s breeding ewe flock has more or less stabilized (-0.6%) for lambing this spring, after decreasing 15% the past two years from land use change and drought,” he added. “Indications from scanning results are that the lambing percentage will be back 2.5 percentage points on last year’s record resulting in a lamb crop of 27.6 million, down 2.5% on last spring. The expectation is that fewer replacement lambs will be kept following a high retention last year to leave export lamb shipments down 1.7% on last year.”
Beef cattle numbers at 3.92 million this June were 1.3% down on the previous year. Expectations are that beef production shipped this year will decline 5% from a lower cull cow slaughter as new dairy herds consolidate, a continuation of conversions from sheep and beef farms to dairy, but at a slower rate than recent years. There will be some re-stocking in Northland and the Waikato following last season’s dry conditions.
Steer and heifer production reflects the decline in beef cow numbers in recent years though bull beef lifts (+0.9%) because of a slight increase in bull beef calves in recent years. This was mainly due to improved margins for calf rearers in the spring of 2009. However, more bulls are expected to be finished at 18 to 20 months than in recent years for cash-flow reasons.
“Where the exchange rate lies between November and June when the majority of farm production is sold, will have a large influence on sheep and beef profitability at the farm level and export earnings,” Mr. Davison said. “Based on a more optimistic exchange rate assumption than today of a 68 cents/US$ exchange rate and its associated cross rates, all classes average sheep and beef farm profitability before tax is estimated to average $54,000 (US$39,309) per farm for 2010-11, down 5% on 2009-10. At a less export favorable exchange rate of 72 cents U.S. to the N.Z. dollar, this would see sheep and beef farm profitability fall to $34,000 (US$24,750) per farm.”