Allan Barber: Early spring a problem for stock management

A definition of livestock underlines the difficulty of predicting prospects for the new season, which officially starts on October 1.

Livestock are animals bred to keep farmers in the lifestyle they're accustomed to, livestock buyers crazy and meat workers in a job; they are born in the spring, mortgaged in the summer, given away in the autumn and mortgaged in the winter.

The price inevitably goes up after they're sold - and down if the farmer holds them.

This season's special spin is that spring has arrived early, meat prices have stalled in the market and, consequently, at the farm gate.

As a result farmers are faced with two options: either sell without recovering the high price they paid for the stock at the saleyard or hold it for a few more weeks and put weight on.

The second option then creates two downstream problems. The animals retained eat the spring grass that should be kept for new stock and they get too fat.

Although the Meat & Wool Economic Services report on livestock on hand isn't yet complete, it's possible to pull together some of the strands to assess progress this spring and what this means for livestock producers and meat exporters for the new season.

For lamb producers it's been such a good spring so far that it has completely offset the lower lamb conception rates caused by the dry summer and autumn.

The main problem at the moment is that old season's lambs are too heavy for the premium markets.

When scanning rates and tailing are taken into account, the lamb drop this spring is expected to be similar to last year's provided the weather remains favourable over the next two weeks, until after the peak kill in Southland.

The next challenge across the whole country is to get some decent rain to ensure good spring grass growth.

On the beef side of the sector, the bobby calf kill is 11 per cent below last year, if reported numbers to date can be relied on. This indicates that calf retention numbers will be ahead of last year and well up on the serious drop in numbers two seasons ago.

This caused half the current season's reduction of over 200,000 in cattle to slaughter, which has made it a long, tough winter for the North Island beef processors.

The shortage of cattle may also be due to a gradual but distinct fall in breeding herds, which suggests that farmers are chasing cattle to finish, rather than breed.

The processing margins are very thin, which is why the price paid in the North Island has remained virtually on par with last year.

The slightly lower dollar and cattle volumes would normally create serious pressure on processors to pay more, but at the moment most beef chains are still closed for the winter.

Beef prices in the US are still historically high, but there's very little being traded at present, so the effective price for the new season won't become evident for a few months yet.

Lamb has come off its peak in Europe and the forecasts are for the new season to be harder than for at least two years.

The other unknown is what is likely to happen with the currency. Predictions of the exchange rate falling back to the low to mid 60USc and 35 pence against the NZ dollar are obstinately refusing to come true.

A recent report suggested that the uptake of NZ dollar Eurobonds by international investors would underpin a high exchange rate for up to five years.

That would be disappointing for farmers, so meanwhile perhaps we should all just pray for rain.

* Allan Barber is a freelance writer, business consultant and former chief operating officer at Affco.