Farmers fear top prices won't last

Lamb prices are hitting record highs but one farming leader says the key export sector is nervous about the sustainability of good returns.
Bruce Wills, who farms about 8500 sheep and cattle near Napier, said it had been a long down cycle for the sector.
"Most of us [sheep and cattle farmers], we've got some significant repair to do to our balance sheets, we've got some significant catch-up with repairs and maintenance," he said. "Most of us have got significantly more debt than we had five [or] seven years ago."
Mr Wills, who is chairman of Federated Farmers Meat & Fibre, said farmers were in awe at how quickly prices had recovered.
"One of the sad reasons they've recovered so quickly is purely a re-balancing of supply [to] demand because it's been so tough for so long we're now producing significantly less lambs, less wool than we have traditionally done.
"So finally the benefits of lower supply are being shown in higher price and that's coincided with a good commodity boom as well."
Rabobank's latest Agribusiness Review said lamb prices had hit record levels, with March farm-gate average pricing 31 per cent higher than the previous year.
Meanwhile, farm-gate prime beef prices rose 4 per cent during March and were only 10 per cent lower than record levels of September 2008, the report said.
Mr Wills said many people had farmed without profit for years, with losses building and overdrafts capitalised into long-term debt.
"Sheep and cattle farmers welcome these sharply better prices that we're seeing today but it's crucial for this sector that it's not a five-minute wonder."
Rabobank senior analyst Hayley Moynihan said demand was also rising in new markets for what had typically been lower-value products, such as offal.
"There's been an overall increase in demand for protein and, of course, that flows through to all of the markets in terms of beef and sheep meat as well as things like pork and poultry, and much of that is an emerging markets story," she said.
Higher prices were sustainable at higher-than-historical levels over multiple seasons "provided we don't have any major shocks in those markets".
Beef and sheep meat were typically at the higher end of the meat spectrum in terms of price, she said: "That's the other risk, if that gap gets too big consumers may trade across species."
BNZ economist Doug Steel said domestic consumer meat prices rose 4.1 per cent in the year ended February. "Looking forward and through 2011 you'd expect to see some further upward pressure on domestic prices for meat," Steel said.