Sheepmeat, beef export receipts set to rise

The forecast average value of sheepmeat exports is a record high and 18 per cent up on the five-year average. Photo / Stephen Jaquiery

Total combined sheepmeat and beef export receipts for the 2021-22 season are forecast to lift 11 per cent on 2020-21 to $9.6 billion, 21 per cent higher than the five-year average.

Beef + Lamb New Zealand's Mid-Season Update 2021-22 showed a positive outlook for global sheepmeat and beef trade, supported by solid fundamentals in key markets and demand projected to continue to exceed supply.

"Strong demand from the US and China has underpinned record highs in the first quarter of the season for both sheepmeat and beef returns, and a tightening of global beef supply has added fuel to the global beef market," B + LNZ's chief economist Andrew Burtt said.

"The positive market sentiment is supported by the outlook for the New Zealand dollar, which is favourable for New Zealand exporters. A greater proportion of the strong prices in New Zealand's export markets is expected to flow into farm-gate returns."

B+LNZ forecasts farm profit before tax to lift 29 per cent in 2021-22 to an average of $116,200 per farm (inflation-adjusted).

"While this is a welcome increase, it's from a low figure in 2020-21 and is less than in 2017-18, 2018-19 and 2019-20. Strong farm-gate sheep prices underpin an 11 per cent increase in gross farm revenue.

"However, inflationary pressure is causing on-farm costs to lift sharply, with farm expenditure forecasted to increase 4.5 per cent."

The forecast average value of sheepmeat exports is a record high and is 18 per cent up on the five-year average.

Total lamb export receipts are forecast to increase by 13 per cent in 2020-21 reflecting a 14 per cent lift in the average value of lamb.

Lamb export volumes are forecast to be down 1 per cent on last season as the lamb crop in spring 2021 is forecast to have been slightly lower than in 2020.

Export receipts for both sheepmeat co-products and mutton are predicted to increase 6 per cent.

Beef and veal export revenue is expected to be $4.9 billion in the 2021-22 season (up 11 per cent compared to 2020-21), even though the volume of exports is forecast to decline 2 per cent to 493,000 tonnes.

Imported beef demand in the US is expected to be strong, underpinned by declining beef production there.

"Like many other industries, global red meat trade faces several key challenges in 2022 including the ongoing pandemic uncertainty, continuing supply chain disruption -including high freight costs - the impact of tightening monetary policy in key markets on consumer demand and the sensitivity of agricultural trade to geopolitical tensions," Burtt said.

While farm-gate prices for sheep and cattle boost profitability, farmers were wary about the impact of the Omicron variant of Covid-19 on processor space and their ability to move livestock off-farm when finished, as well as the possibility of holding livestock for longer and needing additional feed.

They also remained concerned about the speed of increasing environmental regulation and the encroachment of carbon forestry businesses changing the landscape of rural communities, he said.