Lamb crop drop
There's been a dramatic and larger than expected drop in the number of lambs produced in New Zealand.
Average export values continue their upward march with lamb at $11.83/kg cwt for September. However, the overall flow of processed sheepmeat was slow in September, with total export volumes down 16% year-on-year (YOY) to 16,200 tonnes.
With eyes firmly on new season lambs, the final slaughter tally for the 12 months to 28 September 2024 was close to 18.35m head, up 1.8% on the 2022/23 season. Mutton numbers came in at nearly 3.1m head, down 6% on last season.
With fewer ewes, slightly lower lambing percentages, and severe weather affecting the hub of the lower South Island during lambing, lamb numbers for the 2024/25 export season are likely to fall short of the 2023/24 tally. There is a possibility of processing fewer than 17m head.
Export to China for Chinese New Year celebrations need to be shipped by mid-November. Chinese New Year is a vital consumption period for mutton and reflects the market's positive outlook. The good news is that average export values of mutton to China have steadily improved over the past months (to September), a trend we hope will continue into the 2024/25 export season.
The UK and EU markets for lamb are also showing positive signs, mainly driven by low domestic inventory, particularly in the UK.
Dairy
New Zealand milk production for September has shown a very strong start. The fourth month of the season saw robust milk supply, with growth up by 4.1% year-on-year (YOY) on a tonnage basis, and 5.2% YOY on milksolids basis. While milk flows in New Zealand have now passed their peak, the data is yet to be announced. However, it is likely to show extra milk for October compared to the last few seasons, continuing the trend in milk production for the season-to-date.
Across the ditch, the 2024/25 production season is underway. For the month of September 2024, Australian milk production was up 1.4% YOY, with growth in the states of Victoria, New South Wales, and South Australia. The combined milk production results for August and September for Australia and New Zealand mark the strongest start to a season in more than a decade.
Production in the Northern Hemisphere is a mixed bag. September milk collections in the US were marginally higher compared to last year, up 0.1% YOY.
Beef
Cattle pricing in New Zealand is starting to ease from recent record highs as more spring-finished animals head out the gate.
Prices are likely to settle and slightly decline through summer, following a traditional seasonal trend. Even with some easing on the way, the price outlook remains strong and above five-year averages.
When it comes to pasture growth and utilisation for finishing cattle, seasonal conditions vary across the country. Conditions are very good in the upper north but somewhat challenging in the lower south after periods of cold and wet weather. October pricing at the saleyards has eased in some instances by up to NZc 20/kg lwt compared to September. Demand for young stock varies with the conditions.
Data for total beef exports for the October-September 2023/24 period shows a total volume down 2% YOY to 487,000 tonnes. This is up 2% compared to the five-year average. Volumes to the US are up 9% YOY to 180,800 tonnes, while volumes to China are down 22% to 159,300 tonnes. Increases in export volumes year-on-year were also seen in Japan and Canada, up 46% and 50% to 35,000 tonnes and 24,400 tonnes, respectively. Japan and Canada are also up 27% and 42% compared to the five-year average volumes. Seasonal beef consumption in Japan increases from November, which bodes well for New Zealand beef, given the upswing in recent volumes to this high value market.
Farm Inputs
It was a volatile month for fertiliser markets, with urea, phosphate, and potash prices all rising from early October levels.
The US dollar strength is playing a key role in influencing prices, as the NZD/USD exchange rate is now down 2.8%.
Retail urea prices rose by 3% in October (as of 31 October) to reach NZD 850/tonne - a level not seen since May. We can partially attribute rising domestic urea prices to the weakening New Zealand dollar. We can also attribute this price action to the expectation that India will return to the market with another tender, following recent purchases.
Looking forward, the short-term market direction will likely be influenced by India's purchasing activities - given that India's domestic sales are up, and production is down year-on-year, Indian import demand could be strong.
In China, domestic prices continue to ease. Nevertheless, China remains absent from the export market.
There is still no indication on when it will return to the export market, but 2024 seems unlikely.
For phosphates, retail prices remained flat month-on-month. However prices are still elevated, reflecting the tight global supply situation.
Adding to the supply issues, there have also been some production and shipping issues in the US as a result of the recent hurricane. As with urea prices, Indian demand will be a key influence on short-to-medium-term price action.
On the supply side, there's little evidence to suggest any improvement for now, so downside over the coming months seems limited.
