According to Beef + Lamb New Zealand’s (B+LNZ) New Season Outlook 2020–21, the challenging environment is predicted to cause a decline in both sheepmeat and beef export receipts in 2020–21.
The Outlook forecasts lamb export receipts to decline by almost 15 percent and sheepmeat co-products to decline by around 8 percent compared to the 2019–20 season.
Beef and veal export revenue is forecast to decline by 9 percent on 2019–20.
The uncertainty in the export market will be reflected in farm-gate prices and subsequent farm profitability says B+LNZ’s Chief Economist Andrew Burtt.
The Outlook predicts that the average farm profit before tax on sheep and beef farms in New Zealand will fall 26 percent to average $115,100 this season.
B+LNZ’s Chief Insights Officer Jeremy Baker says the uncertain global picture reinforces the need for stable and predictable domestic regulation to avoid putting further pressure on the red meat sector at a time when its export receipts are critical to the New Zealand economic recovery.
“Despite the challenges, red meat exports are predicted to be greater than $9 billion and will represent more than 17 percent of New Zealand’s total export receipts,” says Baker.
Burtt says, “Much of the predicted profit decline is a result of COVID-19, the drought of 2020 impacting production and increasing competitiveness in key beef export markets.”
“This Outlook sets the scene for a challenging year. Farmers will tightly control expenditure and focus on what can be optimised behind the farm gate to make the most of the season and be best placed for the next.
“While there is uncertainly, there are solid underlying market fundamentals that will continue to support demand for New Zealand sheepmeat and beef exports.
“Average export values are expected to be supported by the positive market fundamentals, and are forecast at similar levels, or slightly above, five-year averages.
“China’s demand for meat protein continues to be fuelled by pork shortages that have resulted from African Swine Fever (ASF), and there is growing demand for high quality, nutritionally rich proteins. A shifting consumer preference towards food safety will also support demand for New Zealand sheepmeat and beef,” says Burtt.
The trading environment will also face ongoing uncertainty around key trade negotiations. Brexit outcomes and the relationship between the US and China will have an influence on market dynamics in the new season.
Wool returns are forecast to remain depressed, with shearing expenses still on the rise. With all these factors combined, gross farm revenue is expected to decline.
For more information, please contact Beef + Lamb New Zealand’s Communications Advisor Abigail Delaney on 027 209 9891.