Covid 19 coronavirus: Pandemic set to hit NZ red meat sector hard in 2020/21 - Beef and Lamb NZ

Covid-19 is expected to hit red meat exports hard in 2020/21, Beef and Lamb NZ says.

Covid-19 is expected to hit New Zealand's beef and sheepmeat exports hard in 2020/21, which could see farm profits fall by 26 per cent, Beef and Lamb NZ said.

The farmer-funded industry group said in its season outlook the pandemic continued to cause uncertainty for both beef and sheepmeat exports, impacting global economies, consumer demand and trading channels.

"Steep declines in economic growth are being recorded in all major economies, excluding China, unemployment is soaring,consumer spending has slumped and the purchasing power of key New Zealand markets has been restricted," Beef and Lamb said.

On a positive note, while most markets were projecting a major global economic downturn, the primary food sector was expected to show significantly more resilience to the pandemic crisis compared to other sectors, Beef and Lamb said.

Total beef, veal and sheepmeat export revenue for the 2020-21 season is forecast at $7.39 billion, down 12 per cent or $1 billion, from 2019-20, it said.

Beef and Lamb expects lamb export receipts to decline by almost 15 per cent and sheepmeat co-products to fall by around 8 per cent compared to the 2019-20.

Beef and veal export revenue is forecast to decline by 9 per cent on 2019-20.

Uncertainty in the export market will be reflected in farm-gate prices and subsequent farm profitability, Beef and Lamb's chief Economist Andrew Burtt said.

Beef and Lamb predicts that the average farm profit before tax on sheep and beef farms in New Zealand will fall 26 per cent to an average $115,100 this season.

Chief insights officer Jeremy Baker says the uncertain global picture reinforced the need for stable and predictable domestic regulation to avoid putting further pressure on the red meat sector at a time when its export receipts were critical to the New Zealand's economic recovery.

Despite the challenges, red meat exports are predicted to be greater than $9 billion and will represent more than 17 per cent of New Zealand's total export receipts, Burtt said.

Much of the predicted profit decline was a result of Covid-19, the drought of 2020 impacting production and increasing competitiveness in key beef export markets.

"Farmers will tightly control expenditure and focus on what can be optimised behind the farm gate to make the most of the season and be best placed for the next," Burtt said.

"While there is uncertainly, there are solid underlying market fundamentals that will continue to support demand for New Zealand sheepmeat and beef exports," he said.

"Average export values are expected to be supported by the positive market fundamentals, and are forecast at similar levels, or slightly above, five-year averages."

China's demand for meat protein continues to be fuelled by pork shortages that have resulted from African Swine Fever, and there was growing demand for high-quality, nutritionally rich proteins.

A shifting consumer preference towards food safety will also support demand for New Zealand sheepmeat and beef, Burtt said.

The trading environment would also face ongoing uncertainty around key trade negotiations.

Britain's exit from the EU and the relationship between the US and China will have an influence on market dynamics in the new season.

Wool returns are forecast to remain depressed, with shearing expenses still on the rise.

With all these factors combined, gross farm revenue is expected to decline.

Lamb and Mutton

For 2020-21, total lamb export receipts are forecast at $2.94 billion, down 14.8 per cent on 2019-20.

Co-products are forecast to decline a further 7.9 per cent.Lamb exports are forecast to be down 6.5 per cent to 280,000 tonnes shipped weight, driven by a lower2020 lamb crop.

Average export returns for the season are forecast to decline 9.3 per cent to $9,841 per tonne but remain 3 per cent above the five-year average.

Beef

Export revenue from beef and veal in the 2020-21 season is forecast to be $3.85b, down 9 per cent on 2019-20.

Beef and veal exports are forecast to be steady on 2019-20 at 453,000 tonnes shipped weight.

The number of cattle processed for export in 2020-21 is forecast to decline marginally on 2019-20 and export beef production is forecast to be mainly steady at 661,000 tonnes carcase weight.

Average export returns for the season are forecast to decline 9.5 per cent to $7,445 per tonne.

Wool

Beef and Lamb said there was little optimism in the outlook for wool.

The outlook for 2020-21 is for wool exports to decline 2.8 per cent on 2019-20.

Average export receipts at FOB are expected to decrease 34 per cent to $3,700 per tonne, following an 18 per cent drop the previous year.

Revenue

Gross farm revenue for the 2020-21 farming year, which ends on 30 June, is forecast to average $559,300 per farm – down 10 per cent.

The sheep and cattle revenue accounts, which combined account for three-quarters of gross farm revenue, are forecast to decline to levels below 2017-18.

Wool is forecast to be about 30 per cent lower than in 2017-18, reflecting the challenging circumstances in the wool sector.