Beef + Lamb NZ new season outlook positive for farmers

This spring's national lamb crop is forecast to be 22.8 million head, 0.9% higher than in 2020, reflecting an increase in ewe and ewe hogget lambing percentages. Photo / Peter McIntosh

Covid-19 uncertainty reinforces the need for stable and predictable domestic regulation, to avoid putting pressure on the red meat sector whose exports are critical to the economy, Beef + Lamb New Zealand chief economist Andrew Burtt says.

B+LNZ's new season outlook, released yesterday, showed the forecast for global sheepmeat and beef demand was positive for the 2021-22 season, supported by solid market fundamentals, strong demand and tight supply.

It forecast average farm profit before tax to lift 9 per cent, reflecting a 4 per cent lift in gross farm revenue and increasing sheep revenue, including a modest lift in wool prices.

However, the forecast for a stronger New Zealand dollar would offset some of the buoyancy and limit increases in farmgate prices.

B+LNZ forecast New Zealand's receipts from exporting red meat would be about $8 billion, slightly down on 2020-21.

While lamb export receipts were forecast to increase by 2.2 per cent on 2020-21, beef and veal were forecast to decline by 7 per cent driven by a decline in production and the adverse impact of the high NZD on export values.

China remained a critical driver of red meat export performance in 2021-22.

Its demand for meat protein continued to be fuelled by pork shortages resulting from African Swine Fever and was supported by growing consumer incomes and urbanisation.

The challenge in the new season remained disruptions to supply chains and increased freight costs related to the Covid-19 pandemic, the spread of the Delta variant and the impact on economic recovery.

This spring's lamb crop was forecast to be 22.8 million head, 0.9 per cent higher than in 2020, reflecting an increase in ewe and ewe hogget lambing percentages.

The weighted average lamb farmgate price was forecast to be $7.24kg, (or $137 per head) down 2 per cent on 2020-21 but up 5 per cent on the five-year average.

The total number of sheep at June 30, 2021, was estimated at 25.83 million, down 0.8 per cent on the previous June and nearly 40 per cent lower than in 2000.

In the South Island, the total number of sheep decreased 1.2 per cent, with a 0.9 per cent fall in Otago-Southland. Beef cattle numbers in the South Island dropped 3.6 per cent to 1.2 million.

There has been a notable shift in price direction for all wool types at the start of the 2021-22 wool season, which was positive news for woolgrowers after a prolonged period of low returns.

However, even with the price lift, prices would have to lift substantially before wool became profitable again for farmers.

Global economic recovery post Covid-19 was underpinning the lift in prices because demand for wool was income-sensitive.

The increase had been particularly notable in the merino and fine wool categories, which had recorded "exceptional" lifts in recent weeks.

Shearing expenditure increased 3.8 per cent in 2021-22 to average $27,200 per farm or $5.71 a head. Five years earlier, expenses averaged $20,300 per farm or $4.22 per head.

Most farm classes faced a deficit in their net wool account (wool revenue less shearing expenses), the exceptions being the South Island high country and hill country, where wool revenue exceeded shearing expenditure.

Labour shortages with Covid-19 border restrictions and lockdowns requiring smaller crews and changes to processes and health and safety had exacerbated the situation.

Some farmers had changed shearing policies, including less frequent shearing, changing sheep breeds, and changing the cattle-to-sheep ratio on-farm.

Farmer confidence was mixed; while on-farm profitability was positive, resilience was being tested by the volatility of adverse weather events and the extent of environmental regulation, he said.

Farmers were expected to spend an average of $491,300 on goods and services for their farms, up 3 per cent on 2020-21.