Sheep price outlook promising

17:17, Mar 10 2014
Beef + Lamb NZ chairman Mike Petersen
FOCUS: Beef + Lamb NZ chairman Mike Petersen is telling sheep and beef farmers not to get side-tracked by comparisons with the well-performing dairy sector.

United States farmers rebuilding their herds and other signs good meat prices are ahead, might lift the bruised confidence of Kiwi sheep and beef farmers.

Beef + Lamb New Zealand chairman Mike Petersen said the confidence of sheep farmers was a concern despite promising prices.

This was particularly the case for sheep farmers in the South Island where there was ongoing dairying growth and record milk prices.

However, sheep and beef farmers needed to have a bright outlook on the future of their sector, Petersen said in an email update to levy-paying farmers contributing to the industry-good organisation.

"Don't get side-tracked by comparisons with the well-performing dairy sector," he said.

"They are like chalk and cheese when you look at where we have come from, and what we need to do to make our sector more profitable.

"Focus on the areas where you have influence and control. Invest in your farming business, innovate and adapt, and importantly encourage, reward and upskill good people to grow the sector. The rewards will follow."

Petersen said sheep and beef farmers needed to get involved in business beyond the farm gate when it related to their farming operations.

Beef + Lamb is working on several projects to help lift their confidence over the next few months.

Petersen said the summer season had been a mixed bag for farmers with some areas reaping favourable conditions and others meeting cold, windy or dry conditions.

"Farmers in the south are complaining about no summer to speak of, and many parts of the central and northern North Island are now drier than they were this time last year in what was the worst drought in 70 years," he said.

"On the plus side, pricing has remained buoyant and farm-gate prices have remained well above last year's levels for beef and importantly for sheep meat in particular."

He said farmers in North America seemed to have reversed the "liquidation" of United States cattle herds.

"Herd rebuilding has commenced with strong demand for heifers which has been accelerated by the drop in corn prices for feed, to levels of about half what they were 12 months ago," Petersen said.

"This is significant for us in a number of ways.

"Firstly, the retention of animals for breeding and finishing in the US will shorten supply in that market."

The price for domestic lean beef had risen significantly in recent weeks, and while imported lean beef had not moved as fast there had been strong price increases. The futures market also indicated stronger prices ahead with the grilling season in the US due to start soon.

Exports of beef by the US are now about 12 per cent of production from a herd of about 60 million cattle compared with the New Zealand herd of 3.7 million.

Tighter supplies will likely result in meat products diverted back to the US domestic market and away from markets where New Zealand competes with the US.

Sheepmeat supplies are down globally, with New Zealand's export production estimated to be back significantly at about 19 million lambs because of last year's drought at mating time.

Meat processing companies are reporting firm sheepmeat demand and price rises outside of the boom-and-bust movements of previous years.

Chinese growth has delivered better lamb returns and this is forecast to continue for the near future.

Beef + Lamb has identified good on-farm performance and profitability from farmers focused on improving productivity or efficiency with good cost control.

It is working with farmers in improving genetics, feed and farm management.

A new Red Meat Profit Partnership initiative showing promising signs is a Primary Growth Partnership project between six meat companies, two banks, the Ministry for Primary Industries, and the industry-good organisation.

Farmer voting will guide Beef + Lamb on several important issues at its annual meeting in Feilding on March 14.

The Meat Industry Excellence reform group is seeking support from farmers in a remit asking Beef + Lamb to reimburse further travel and meeting expenses to continue their efforts in reforming the red-meat sector.

A group of farmers reviewing the future of industry-good investment by farmers in the wool sector has concluded there should be a referendum this year and farmer votes are needed for this to go ahead.

Also on the agenda is the merging of the genetics groups Ovita and Sheep Improvement Ltd, with the Central Progeny Test to form Beef + Lamb New Zealand Genetics.

The meeting will also signal the end of Petersen's 10-year involvement with the industry-good organisation.