Beef prices tipped to remain high

Softening beef prices are likely to challenge New Zealand supplies.

Beef prices are likely to remain well above historical averages next year, despite continued global growth, Rabobank's latest beef quarterly report says.

Growth was being led by Brazil, Argentina and the United States and it would likely keep global prices low.

Softening prices were likely to challenge New Zealand beef prices, Rabobank animal proteins analyst Matthew Costello said.

In the coming months, New Zealand cattle prices would be influenced largely by how quickly domestic cattle supplies came online.

Farmgate prices were expected to come under increasing pressure further into 2017.

That was largely because of the expected increase in US beef production, pegged to be up by 3% next year, which would soften US demand for New Zealand beef, Mr Costello said.

The US election result would also have an impact, albeit in the medium to longer-term, as any chance of the Trans Pacific Partnership agreement being approved was now unlikely.

That would give Australian beef exports to Japan a tariff advantage of more than a 10% over New Zealand beef.

Despite those factors exerting some pressure in New Zealand, beef prices were likely to remain well above historical averages, Mr Costello said.

"While there will be downward pressure on beef prices, we are forecasting a restriction in domestic beef production as the New Zealand herd recovers from liquidation and this will help limit any potential downside for prices," he said.

The low beef supply forecast from Australia in coming years would also support New Zealand beef prices.

Those factors should ensure New Zealand farmgate prices next year stayed above the five-year average. The latest Situation and Outlook for Primary Industries said New Zealand beef production was forecast to decline by 50,000 tonnes to 625,000 tonnes as fewer dairy cows were sent to slaughter next year.

Production was about 50,000 tonnes higher than usual in each of the past two years because of record dairy cow culling resulting from low dairy prices.

Assuming the dairy herd resumed growing as forecast, beef production volumes would naturally fall back to previous levels, the report said.