Fonterra capital return could boost GDP – ANZ Report
The Fonterra divestment capital return should provide “a tailwind to GDP growth” next year, according to a new ANZ NZ report, but it’s not “manna from heaven” for the economy.
That's the essence of the ANZ's latest Agri Focus entitled - Scaling New Heights.
The report says global food prices are on the rise and that is likely to see average farm-gate returns for beef and sheepmeat reach record levels.
ANZ agricultural economist, Susan Kilsby says lamb products have continued to lift in prices in our international markets. Surprisingly, it notes that lamb flaps and forequarters, which are typically sold to China are now fetching higher prices than they did before the start of the pandemic.
One of the reasons for the higher lamb prices, the report says, is that there are fewer lambs being presented to slaughter and processors are having to secure what they can. The unknown is what the final lamb tally will be, but the word from B+LNZ is that about 1% more lambs will be tailed this year.
There's also good news for beef farmers with prices on the rise due to a global shortage of the product. Major beef producing countries such as Brazil, Argentine and Australia are all exporting less beef for various different reasons. There is also increasing demand in Asia and in particular China.
Kilsby's team predicts the schedule price for bull and steers in the North Island will be in the $6.15 to $6.25 range and just shy of $6 in the South Island. ANZ believes beef prices will remain at these high levels in the year ahead.
As far as dairy is concerned, the report says it's been a slow start to the season due to wet and cold weather. But ANZ believes dairy prices are trending upwards and believe the farmgate milk price will be $8.20kg/MS. It further predicts that if commodity prices can be maintained near current levels to January 2022, it could see a further rise in the farmgate milk price.
On deer, the report says the tide is turning positively for the sector with good sales of chilled venison being made in Europe. However, it agrees with the deer industry view that it will still take more time for the sector to be back to where it was 18-months-ago.
International prices for our main horticultural exports remain strong, says the report, but it notes that earnings will be down due to lower volumes exported. Demand for kiwifruit is said to remain 'robust' in market and returns will be similar to last season because of the increased volume of SunGold exported.
However, labour issues haunt the sector and Rural News has been told that up to 20% of last season's apple crop was not picked due to labour shortages.
This is the bad news in the report, which states that labour shortages are plaguing the whole primary sector. It says the problem is not going away anytime soon. It quotes Zespri as saying the kiwifruit industry will be 6500 workers short this season. Most other horticultural groups are facing similar challenges and the meat industry also has a major problem.
Finally, the report touches on what many people are saying is the single biggest problem - logistics. It zeros in on the problems of getting chilled lamb to market in a timely way because it has a much shorter shelf life.
