Beef returns down
Still, under an assumed exchange rate of 61 US cents, gross farm revenue is forecast to decline 3.8 percent to an average $597,600 per farm due to lower returns across beef, sheep and wool.
Beef prices, which reached records during the first half of the season, are now being affected by covid disruptions and cattle revenue is expected to drop 6.4 percent to $151,500 per farm. Beef+Lamb expects beef receipts to contribute about 25 per cent of farmer revenues this season.
Farmgate returns for sheep, which account for almost half of all gross farm revenue, are expected to be down about 4.2 per cent at $293,900 per farm, with fewer prime lambs and sheep sold than during the prior season.
Beef+Lamb also expects wool revenue to be down 4.7 per cent at $36,100 per farm this year, as the fibre remains in decline across almost all classes of fine, medium and coarse wool, offsetting an increase in the average volume sold.
Fuel price impacts
Aggregate sheep and beef farm revenues at the farm gate for the year are forecast to be up 3.4 per cent to $5.9 billion, of which $4.2 billion will be spent on farm inputs, an inflationary increase of 1.8 per cent.
That translates to an average of $457,100 per farm, with major cost items including fuel, fertiliser and seeds.
Beef+Lamb said that fuel has seen the largest increase for the season, jumping 8.6 per cent and now accounting for 3.1 per cent of total farm expenditure – or about $14,170 on average.
While servicing interest on loans will account for about 11 per cent of overall farm expenditure, this was actually down 5.9 per cent at $52,700 per farm, reflecting lower interest rates, the report noted.
Red meat demand in China
Burtt said a continued shortage of pork in China, as a result of the African swine fever virus, is expected to underpin a recovery of demand for New Zealand sheep and beef product exports, with Chinese pork production expected to be down 40 per cent on pre-swine fever levels.
"During 2019, Chinese consumers were increasingly turning to sheepmeat and beef as alternatives to pork. As economic activity recovers following covid-19 being brought under control, demand for meat is expected to similarly recover."
He said shifting market access dynamics also have the potential to change the distribution of beef exports this season, with US exports constrained due to the closure of meat processing plants on the back of covid-19.
"This may increase competitive pressure for NZ beef in some markets but has the potential to create opportunities in others."
He noted that a significant reduction in Australian sheepmeat and beef production will also provide some support for demand for New Zealand red meat in key markets during 2020.
"How the situation develops from this point is uncertain given covid-19, however, the NZ livestock production and red meat processing sectors continue to work hard to deliver products that meet customer needs."
- BusinessDesk
