Although the outlook predicts that the sector will continue to be challenged in 2021 by COVID-19 disruptions and increasing competition, particularly in beef export markets, global demand for protein remains strong.
“We’re seeing an increase in meat consumption in emerging markets, and a growing demand for high-quality proteins from consumers in these countries as well as increasing demand from China due to underlying demand and African Swine Fever restricting pork supplies. New Zealand is well positioned to meet these demands,” says B+LNZ’s Economic Service’s Chief Economist Andrew Burtt.
In 2021, we expect some recovery from weak foodservice demand, but continued disruptions and increased costs across the supply chain, and a higherrisk environment will be challenges that weigh on export and farm-gate returns.
Total beef, veal and sheepmeat export revenue for the 2020-21 season is forecast at $7.43 billion, down 13 per cent from 2019-20.
This decline is largely driven by the unpredictable global trade environment, strength of the New Zealand dollar, a decline in volumes for export as New Zealand’s livestock numbers are rebuilt following drought and some softening in prices.
B+LNZ’s Chief Executive Sam McIvor says while sheep and beef farmers are expecting a more subdued season ahead, 2020 was significantly more positive for returns and production than expected, given the impact of drought and COVID-19, and is coming off near-record levels in the previous years. In fact, projected returns for 2020-21 will be above the ten-year historical average.
“This is a testament to the red meat sector’s agility and deep market understanding. There has been an incredible amount of work done behind the scenes to pivot and reposition products into different markets and channels. In a global context, New Zealand is performing well and farmers should be proud that their product that can meet these global demands.”
For 2020-21, total lamb export receipts are forecast at $2.9 billion, down 14 per cent, and the 2020 lamb crop – estimated to be 22.9 million head – is forecast to have been 1.2 per cent lower than in 2019, which is a strong result given the impact of the 2020 drought.
As farmers rebuild flocks following drought, mutton export receipts are forecast to decline 7.1 per cent on 2019-20, driven by declining average export values and a 2.9 per cent decline in mutton production.
Export revenue from beef and veal in the 2020-21 season is forecast to be $3.7 billion, down 14 per cent on 2019-20 and exports are forecast to decline 2.6 per cent to 453,000 tonnes shipped weight.
A strong New Zealand Dollar
New Zealand sheepmeat and beef export returns and farm-gate prices are significantly impacted by exchange rate movements.
“A significant lift in the New Zealand Dollar, which is forecast to be up 12.5 per cent, and a small decline in production means that prices have held up reasonably well given the circumstances, especially for sheepmeat,” says McIvor.
The relative strength of the New Zealand economy combined with a weaker USD have led to an outlook for the NZD to average USD0.72 for 2020-21, compared to USD0.64 for 2019-20.
Capitalising on New Zealand’s reputation
The update predicts that changes in consumer attitudes and behaviours following the global pandemic and the shift towards sustainable consumption and production patterns have the potential to impact global trade dynamics in the medium term.
“New Zealand’s reputation as a producer of high-quality natural red meat accompanied by our robust food safety framework, positions our red meat well to capitalise on these shifting consumer attitudes,” says McIvor.
“We’re already taking advantage of these growing trends by using Taste Pure Nature as a platform for our industry to tell New Zealand’s sustainable red meat story.”
Farm profitability and expenditure
After a couple of strong years in 2018-19 and 2019-20, gross farm revenue for the 2020-21 farming year is forecast to average $568,000 per farm – down 9 per cent.
Expenditure is estimated to decrease 5 per cent to average $443,800 per farm for 2020-21.
For more information, please contact Beef + Lamb New Zealand’s Communications Advisor Abigail Delaney on 027 290 9891.
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