KEY POINTS:
Beef exports to the United States are falling as cows are held back to supply the booming dairy sector, according to the latest Rabobank Agribusiness Review.
Beef shipment volume to the US for the year ending September fell 8 per cent on the previous year. The total value
was $707 million, down from $782 million, making up 44 per cent of total beef exports.
Rabobank senior analyst Hayley Moynihan said lower supply was the main reason for the drop.
"We've had some retention of cattle to increase the beef herd," Moynihan said. "We've also had dairy cows held back because of the positive outlook in dairy."
Fonterra is forecasting a record payout of $6.40 per kilogram of milk solids this year and 90 per cent of dairy farmers surveyed for a Rabobank/Nielsen survey in August expected income to rise during the next year.
However, the higher exchange rate had hit strong international dairy prices by between 2 and 7 per cent in New Zealand dollar terms.
Dairy cows were primarily sent to the US for manufacturing beef, where there was increased competition from Uruguay, Moynihan said.
"In the longer term within a bigger dairy herd, we will have increased volumes of manufacturing beef coming through," she said.
Farm gate bull beef prices were down 7 per cent on last year, having strengthened during September before being hit by higher exchange rates towards the end of the month.
Total beef export receipts for the year ending September were $1.6 billion, down from $1.73 billion the previous year.
Meat & Wool's executive director of economics, Rob Davison, said some of the decline was due to the stronger exchange rate with the US dollar.
"At the start of last year wewere at US66c. We know we'rearound US75c now - it's quite abig appreciation," Davison said.
Meanwhile, Rabobank said lamb schedule prices paid by processors to farmers lifted slightly in September, but were still 12 to 14 per cent lower than the previous two years, with the international price for some cuts down about 5 per cent and currency movements generally unfavourable.
Usually there would be a seasonal lift at this time of year, Moynihan said.
"We'd expect it to lift a little bit more from here, but how far it goes will really depend on what returns are available overseas and what the exchange rate is doing as well," she said.
Australian producers had culled more lambs than normal because of drought, affecting export markets where prices had been relatively flat during the last year to 18 months.