Farmgate red meat prices are taking a hit as Covid continues to disrupt dining out businesses around the world.
Farmgate returns for lamb have been stronger than previously anticipated with prices holding near $6.50/kg CW.
Kilsby notes that in its January forecast update, ANZ anticipated prices would drop as far as $6/kg CW.
“While further cuts in schedule pricing can’t be ruled out, it now looks like there may not be much more downside,” she says.
“We remain cautious and now forecast farmgate lamb prices to reach a low point of $6.25/kg CW next month.”
The relative stability is being driven by a combination of factors: international market prices are generally holding, New Zealand’s currency has stabilised, and there are not vast quantities of lambs coming forward for processing
Kilsby says stocking rates are still lower than normal in some regions where destocking of capital stock occurred during last season’s drought.
Pasture growth conditions have also been more favourable this season.
“This, combined with fewer mouths to feed, and more crops grown, has reduced the urgency to offload stock.”
The outlook is also rosier for beef farmers.
Farmgate beef prices have stabilised as the recent as international markets show tentative signs of recovery and supply from competing markets eases.
Kilsby says limited volumes of store stock are being traded at present as cattle are being utilised to clean up pastures which are rapidly losing quality as soil moisture levels rapidly deplete.
The supply of manufacturing grade beef from NZ is starting to slow, which has been supportive of prices in international markets. At the farmgate level, pricing has stabilised after falling quite rapidly over the past few months, says Kilsby.
“Farmgate prices for prime stock tend to fall most years until about February, before gradually picking up,” she says.
Meanwhile, prices for manufacturing cow usually remain soft until winter – after the main dairy cow culling period.
The recent plateauing of schedule prices has also been supported by a slowdown in the volume of stock available for processing. As summer temperatures rise, feed reserves are drying out quickly, making pastures more suitable to feed cattle than fatten lambs.
The dairy cow-cull season may also be slightly later than normal, as strong milk prices and relatively good pasture cover levels encourage farmers to milk cows a little longer than otherwise.
Kilsby says the rate of culling has slowed since the beginning of October.
“This is being driven primarily by fewer beef cows being culled, rather than a significant change in the number of dairy cows being culled.”