Focus on New Zealand - Market overview
Drought hit New Zealand hard in the opening months of 2013, leading to one of the smallest lamb crops in nearly 60 years. Lamb numbers for the year were 25.5 million, down 1.3m compared to 2012, according to Beef + Lamb New Zealand’s (B+LNZ’s) annual lamb crop survey, as the lack of rain diminished feed supplies and reduced the condition of the stock at mating, particularly in the North Island.
The conditions significantly affected livestock numbers because farmers adjusted the number and age mix of their sheep flocks and beef cattle herds to cope. Declining sheep numbers is a long-term trend in New Zealand, as is the reduction in the number of businesses as consolidation occurs to take advantage of efficiencies. In the past year, the overall financial picture for farmers is a positive one, with revenues and profits up.
Gross revenue per farm for 2013–14 increased by an estimated 6.4% on the previous year: sheep revenue grew 6.8% to NZ$201,800, driven by higher prices; cattle revenue, meanwhile, grew 8.1% to NZ$100,200, again driven by prices. Pre-tax profits are showing strong growth, up on average an estimated 21% to NZ$100,000 for 2013-14 for all classes of beef and sheep farm.
"This is a result of steady underlying demand for meat protein, including strong growth in China, improved opportunities through trade agreements, improved, though not spectacular, economic prospects in major markets, and a stable currency generally," says Andrew Burtt, chief economist, B+LNZ. "The increase in lamb prices is expected to more than offset lower production by farmers."
The number of lambs produced per ewe was also strong. At 120.8%, the ewe lambing percentage for the spring of 2013 was slightly down on the record level of 124.6% achieved in the spring of 2012. This, again, was put down to the effects of the drought, which led to fewer multiple births and fewer hoggets put to ram. Good seasonal conditions and lower stocking rates have been catalysts for good survival rates and lamb thrift.
Average carcase weights were an estimated 2.3% up in 2013 to 18.4kg and this trend is set to continue into 2014, with heavier weights still. This is due to lower stocking rates for most regions, following the drought–induced decline in the number of lambs tailed for the spring of 2013.
The number of beef cattle at 30 June 2013, estimated at 3.69 million head, was down 1.3% on the previous June and follows a 2.9% decline for the previous year. As with lamb, drought was a big factor in the decline as farmers reduced their finishing cattle numbers to manage through it.
Input costs have risen globally, and New Zealand is no exception, where farm expenditure is up an estimated 2.9% in 2013-14. Most of this increase is due to an 8.8% rise in fertiliser expenditure.
New Zealand exports 80% of its beef and more than 90% of its lamb, so the international economic outlook is crucial for the country. While in 2012, the rate of economic growth in New Zealand’s major meat and wool trading partners slowed and prospects in 2013 were mixed, an improvement is expected in 2014.
The revenue generated from lamb exports is estimated at NZ$2.6bn for 2013-14, unchanged on 2012–13. The volume of lamb exported decreased 9%, while the average value is forecast to increase 10%.
Export revenues for beef, including hides and other products increased an estimated 4% to NZ $2.7 billion in 2013–14. The volume of meat exported is down 2%, while the average value per tonne is estimated to be up 5% from expected stronger international prices and little change in the NZD/USD exchange rate.
The Red Meat Sector Strategy
Volatility in the meat industry in recent years has affected farmers around the world, with turbulent input costs such as feed and fuel leading to unpredictable sales and profits.
In New Zealand, the industry is tackling this through The Red Meat Sector Strategy, which was formed to find ways to sustainably grow the sector against the background of this volatility. The Strategy was developed by B+LNZ and the Meat Industry Association (MIA), with support from the Ministry for Primary Industries and New Zealand Trade and Enterprise.
In the two years since it was set up, more than NZ$300m, including Crown funding, has been committed to programmes focused on improving operating performance, and on the innovative development of new products.
One of the aims set out in 2011 was to improve the sector’s product range. There has been real progress in this, according to joint chairmen Bill Falconer and Mike Peterson. "Examples include FirstLight Foods Grass-Fed Wagyu, New Zealand Merino’s Silere-branded Merino lamb, ANZCO Foods added-value beef products projects, and consumer portion cuts and branding from Silver Fern Farms," they say.
Increasing the quality and shelf-life of chilled meat increases the desirability of New Zealand product. The MIA is coordinating a number of R&D projects by processing companies in this area. "These, and other initiatives at the company level, are all evidence of a strong commitment across the sector to develop new higher-value product," say Falconer and Petersen. In addition, a lot of other investment in innovation is being undertaken by exporters, processors and farmers, individually and collaboratively, ranging from robotics in processing plants to sheep genetics, the note.
A NZ$15m investment into sheep and beef genetics research over next five years was announced in January 2014, specifically looking at the development of new traits that can be farmed on hill country. Petersen says the government’s funding commitment is a pleasing show of confidence in the New Zealand sheep and beef sector. "This investment supports a whole range of research, identifying new breeding traits that will produce more efficient animals and those that meet consumer preferences in our valuable export markets.
"We’re especially interested in further developing the traits that thrive on hill country, as this is where an increasing proportion of New Zealand sheep and beef production is based these days with changing land use to dairy."
