“We forecast slight increases in farm-gate prices for lamb and mutton in 2018 19, as prices are expected to remain relatively steady in New Zealand’s main export markets and benefit from an expected easing of the New Zealand dollar,” says B+LNZ Chief Economist Andrew Burtt.
“This follows the exceptionally strong average farm-gate prices for lamb, mutton, and beef in the 2017-18 season.”
Burtt says the value of the New Zealand dollar has a large bearing on the sector’s outlook.
“The New Zealand dollar is expected to ease as the economies of our major trading partners strengthen in 2018 19 – principally against the US dollar in which over 70 per cent of red meat exports are traded,” says Mr Burtt.
A combination of tighter mutton supply from both Australia and New Zealand, who contribute the vast majority of international sheepmeat trade, and growing global demand is expected to continue to drive an increase in the average export value of mutton, which influences lamb prices.
China’s demand for red meat from all sources is expected to continue to grow, but demand for lamb, mutton, and beef is also expected to remain strong in all New Zealand’s major red meat export markets.
New Zealand’s export lamb production is forecast to decrease by 1.7 per cent in 2018 19 due to a smaller lamb crop, which is the result of a fall in the number of breeding ewes this year as farmers took advantage of high mutton prices.
Mutton exports are also forecast to be down – by 17 per cent – because of the smaller and younger breeding ewe flock. More ewe hoggets were retained for breeding this year reflecting farmer confidence in sheep production going forward.
Assuming close to average climate conditions in 2018 19, beef and veal export volumes are expected to decline 3.1 per cent, as farmers build their herds.
New Zealand’s beef cattle herd grew by 1.9 per cent to 3.68 million head at 30 June 2018, the second small increase in a row after declining steadily since the 1990s.
Sustained strong cattle prices and the lower labour requirement associated with cattle has encouraged farmers to maintain or lift herd sizes, particularly in the South Island.
As a result of all these factors, total lamb exports are estimated to remain at around $3.1 billion in 2018-19, after breaking the $3 billion mark for the first time in the 2017-18 season
Beef exports are forecast to be around $3.4 billion in 2018-19, a 4 per cent decrease on 2017-18.
“Farm expenditure for 2018-19 is forecast to increase overall, but revenue is also expected to increase, driven by a lift in farm-gate prices which we expect will increase revenue from sheep, wool and cash crops,” says Mr Burtt.
Overall, however, the report forecasts farm profit before tax to decrease 2.8 per cent to $129,700 for 2018 19 on average for New Zealand sheep and beef farms.
Burtt says that while there is potential for international sheepmeat and beef trade to be disrupted in 2018 19 because of geopolitical uncertainty, large-scale droughts, and disease outbreaks in competing animal proteins, the outlook for New Zealand’s sheep and beef sector is positive.
Read the New Season Outlook 2018-19 (PDF, 3.16MB)
(Please note the report also includes regional analysis)
For more information, please contact B+LNZ’s Chief Economist, Andrew Burtt 027 652 9543 or B+LNZ’s Senior Communications Advisor Gwynn Compton on 027 838 6353.