A more prosperous year ahead

The year 2025 is on track to be the year that milk supply growth is likely to eventuate from all major exporting regions. Since the end of last year, global milk supply growth from major exporting regions has been on the rise.

RaboResearch thinks 2025 volumes are likely to hit around 323m tonnes, on par with the prior year. Milk production momentum will continue through 2025, supported by improved profitability for farmers. RaboResearch forecasts 2025 production to be 0.8% year-on-year higher, a level not anticipated to overwhelm markets.

This year is also likely to be a year of improved margins for most producers in exporting regions. Farmgate milk prices are trending higher than year-ago levels.

Furthermore, across the global feed complex, there are no significant issues for dairy producers due to mostly favourable prices and availability. Dairy farm margins are likely to benefit from these factors.

For New Zealand dairy farmers specifically, the year ahead is likely to be characterised by improved demand from China, following multiple years of declining import volumes.

Farmgate milk prices in China shifted lower once more in December 2024 marking a 15% YOY decline. However, this trend reversed in January 2025, with the Chinese milk price shifting upward - a tentative signal that the oversupply of local dairy in the Chinese market has hit the bottom. This follows herd reductions and farm exits, particularly among smaller operators, earlier in the year.

Locally, New Zealand milk supplies have continued to grow. December 2024 milk collections were 1.4% higher than the prior year, bringing season-to-date production to 3.1% on a tonnage basis. The weather over the summer period has supported excellent grass growth. 

However, strong growth rates last December resulted in weaker monthly growth rates compared to the earlier trends of the season so far.

We will likely see stronger production figures compared to last year remain a theme over the beginning of 2025.

Beef

Beef farmgate pricing is likely to remain above the five-year average throughout 2025. Currently, farmgate prices are up to $1.5/kg cwt higher than the five-year average.

A combination of procurement competition and strong demand from key export markets has kept prices steady, with January schedules still close to the seasonal spring high. "Average" long-term data suggests pricing is likely to track sideways over the coming months. With market signals still strong, this will provide good returns in beef for 2025.

Beef livestock inventory presents a challenge for exporters keen to procure animals. Fewer calves were reared in the previous two seasons, and high milk prices have resulted in fewer cattle available compared to 2023 and 2024. Additionally, welcome summer rain across the east coast over the holiday season has relieved pressure to de-stock early.

New Zealand Meat Board slaughter data for the first three months of the export year (since October 1) sees total national head count down 3% YOY with prime steer beef experiencing the largest YOY reduction at 12%.

RaboResearch forecasts a 4% decrease in total beef slaughter numbers for the export year (ending September 2025), leading to reduced overall production. The Beef + Lamb NZ survey fro June 2024 projected a 2.8% decrease in total beef cattle numbers, down to 3.55m head. Although pricing will be strong for farmers, the total volume of exports is likely to be down YOY.

Overall, 2025 is set to be a strong and exciting year for beef farmers in New Zealand.

Sheepmeat

2025 begins with a pleasantly different story in sheepmeat compared to this time 12 months ago. Lamb farmgate pricing is now sitting close to 50c/kg cwt above the five-year average price - a difference not seen since May 2023. In November, average export prices for lamb reached $11.53/kg cwt, the highest value since October 2022.

The main fundamentals shifting the needle in sheepmeat pricing both now and into 2025 are the slowly declining Australian sheep inventory and improved demand and exports to markets outside of China, especially for lamb. Although Australian sheep numbers remain high, they have decreased from the 2023 to 2024 highs.

The 2023-24 export year saw just over 18m head of lamb processed, according to New Zealand Meat Board numbers.

RaboResearch thinks lamb slaughter numbers in the 2024/25 export season may come in under 17m, with Beef + Lamb NZ estimating a 5% YOY decline in lamb crop (a reduction of South Island lamb inventory).

The total volume of sheepmeat exports in the 2024 calendar year (up to the end of November) was down 2% YOY to 338,000 tonnes. During the same period, Europe became the top market for the value of sheepmeat exports at $851m and just over 55,000 tonnes up 13% YOY for volume.

China remains ever important for volume with close to 150,000 tonnes shipped (down 29% YOY) at a value of $826m (up to the end of November).

Venison

In 2024, venison production was a story of reduced supply and a positive post-pandemic market recovery, resulting in stable farmgate pricing.

Prices are expected to remain strong for producers throughout 2025. At the start of the year, farmgate prices were 18% above the five-year average, at $9.10/kg cwt. Although these prices are at five-year highs for this time of the year, an industry target of $10.000+/kg cwt would help ensure strong margins with ever increasing on-farm costs.

On 1 July 2024, Deer Industry New Zealand (DINZ), in collaboration with all five-venison exporters in New Zealand, launched its North America retail accelerator project. This initiative received funding support from the Ministry for Primary Industries (MPI) - Sustainable Food and Fibre Futures (SFF). The $5m investment is forecast to deliver an initial return of $20m through increased retail sales to the US, and keep balance with food service.

Early results of this programme appear positive, as exports to the US and Canada show significant year-on-year increase in volumes in 2024.

Given the focus of the industry, this shift away from the traditional EU market is expected to continue for venison. The limiting factor for total volumes to offshore markets will most likely be supply limitations from New Zealand, rather than weak demand.

With New Zealand leading the charge of globally in farmed deer, and with a positive story to tell around biosecurity and animal welfare, along with diversified export markets, RaboResearch expects the deer industry in 2025 to focus on value, with solid returns likely to flow through to farmers this year.