Spring in demand for farm products

Here is NZX Agrifax’s outlook for key agriculture sectors:

Prices are currently skyrocketing at time of year when US imported beef prices are normally in decline. These prices have finally flowed through to the farm gate with strong returns recorded for all beef going into the new season. The US market will largely determine the direction prices take as the season progresses and early indications are it could well be season to look forward to for beef exporters. Volumes of beef in cold storage in the US are at their lowest levels since 2005 and it’s estimated that total US beef imports will be up by around 10% in 2011 compared to 2010.

Strong demand for New Zealand dairy products continues to underpin our biggest export industry. However, volatility will be the only certain factor in the outlook for dairy commodity prices. While New Zealand is dominating force in global dairy exporting, the volume of milk we produce is small by world standards. Dairy commodity prices are particularly sensitive to changes in supply in countries such as the US where surplus production is quickly pushed onto global markets. Therefore while the longer term outlook for the dairy industry continues to look favourable, we expect it won’t all be plain sailing.

New Zealand’s lowest lamb slaughter in over 20 years has moved this product into specialty line in overseas markets. Global sheep meat production is also down. This has resulted in record prices in most cuts and exporters and overseas buyers alike have cleared stocks. However, weaker European currencies have eroded returns in NZ$. As result of continuing supply pressures, prices for New Zealand lamb for the coming season are expected to remain strong.

European markets remain our biggest export destination for venison, with Germany taking around 40% of the total venison exported. The future for deer farming looks positive, as herd numbers have stabilised to meet demand for it as specialty dish. However, factors such as exchange rates and in-market domestic supply have the greatest impact on farm-gate prices for deer. These factors are mostly beyond the control of both producers and exporters.

Turmoil on world markets has unsettled the grains market in New Zealand and contract prices announced so far are generally weaker than spring last year. Contracts for winter-sown wheat, feed or malting barley are down $15-$60/tonne.

One exception to the dip is maize. Growers in Waikato can sign up at $50/tonne more than last season. Planting of spring wheat and maize has been delayed because of wet weather on the east coast of both islands, raising the prospect of shorter supplies of wheat and upward movement in prices.

• Extracts from Country magazine. For the full article click here.

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