Lamb prices and feed supply improve mid-season outlook

Lamb prices are doing well.

Stronger lamb prices and plenty of grass have bumped up the season's forecast profit for sheep and beef farmers.

Beef + Lamb New Zealand's (B+LNZ) Mid-Season Update revises up its forecast for profit before tax to $75,200 for the All Classes Sheep and Beef Farm.

Six months ago, the outlook had not been so good ($67,000 per farm), but with plenty of feed in most areas and better lamb prices, it's a better outlook, Beef + Lamb New Zealand chief executive Sam McIvor says.

"This B+LNZ Economic Service Mid-Season Update is telling us profitability is still not great, but farmers are in a better space and are confident of their ability to feed stock. We're seeing ewes in excellent condition for mating and we also expect to see strong hogget mating numbers."

The Mid-Season Update points to better-than-expected lamb and beef prices. While B+LNZ doesn't cover wool, the average farm-gate wool price has fallen 25 per cent on last year's four-year high and constrains a full recovery in farm profitability.

Lamb returns up on forecast

Late last year, B+LNZ's New Season Outlook was based on the farm-gate price for prime lambs averaging 485 cents per kilogram.

However, after a poor start to the year, farm-gate prices for prime lambs are now around 560 to 580 cents per kilogram. Across the entire 2016-17 season, the prime lamb price is forecast to average 495 cents per kilogram - or $91 per head - and lambs are forecast to average 18.4 kilograms carcase weight.

"Overall, lamb and sheep revenue is similar to the previous season, which also reflects stronger prices for adult sheep," McIvor said. "Global demand for sheepmeat remains firm due to tighter supply from the two largest exporters - Australia and New Zealand - which has led to improved farm-gate sheep prices that are up 20 per cent on 2015-16."

While lamb prices have been strong in New Zealand's major markets in 2016-17, this has been offset by the appreciation of the NZD against Sterling and the Euro - the currencies in which 40 per cent of New Zealand lamb is sold. The market for co-products and pelts continues to be difficult.

Beef prices remain strong

Beef prices continue to be strong, albeit down from 2015-16's highs, and are expected to average 503 and 492 cents per kilogram for steer/heifer and bull respectively, which is still high compared to their five-year averages.

Favourable climatic conditions, good grass growth and a shortage of livestock have also contributed to lifting farm-gate prices, as processors seek livestock to meet customer needs.

Overall, cattle revenue is forecast to remain near that originally estimated for 2016-17, on the back of cattle prices remaining relatively high.

While the average farm-gate price across all classes of cattle is expected to ease by 5.6 per cent, an increase in the average carcase weight partly offsets this price drop.

Livestock processing

The average carcase weight of lambs processed in the 2016-17 season, which runs from October to September, is expected to be up 0.5 per cent to 18.4 kg per head. 2016-17 export sheepmeat production is estimated to decrease 4.0 per cent to 442,700 tonnes carcase weight.

Despite some negative talk about declining sheep numbers, the number of hoggets retained is forecast to be similar to last season. This indicates farmers are still strongly committed to sheep, Mr McIvor said.

2016-17's export beef production, which is estimated to decrease 1.8 per cent to 607,000 tonnes carcase weight, is impacted by a further decline in cow beef production as the number of cull dairy cows processed declines further.

Read the report at: www.beeflambnz.com/Documents/Information/mid-season-update-2016-17.pdf.

Regional commentary can be found on pages 27 and 28 of the report.

For more information, contact Beef + Lamb New Zealand Communications Manager, Jan Keir-Smith 027 271 7593.

About Beef + Lamb

Beef + Lamb New Zealand Ltd is the farmer-owned industry organisation working for a confident and profitable sheep and beef industry. It works to help farmers make informed business decisions and promote their collective interests.

Priorities include investing in research and development that meets the needs of farmers and the sector, developing farm and farmer capability and delivering knowledge that drives farm performance. It also works to attract and retain talent for the sector, supports the sector's market opportunities, advocates for farmers ability to operate and builds sector confidence and profile within communities.