Pastoral sector overview
The sheep and beef sector has been typified over the past two decades by declining stock numbers and mediocre returns exacerbated by changing land use, rationalisations and more recently, volatile weather events. In comparison to the dairy sector over the same period, which has evidenced strong leadership, coordinated strategy, marketing and supply chain management, the sheep, beef and deer sector can best be described as in a state of flux.
A red meat strategy commissioned by MAF and NZTE and released early this year, highlights the challenges faced by the red meat segment. The strategy prepared by Deloitte shows that in the period between 1990 and 2011 the land area allocated to sheep and beef production dropped by about 27% and the number of farms declined by 41% – whilst at the same time the area allocated to dairy production increased by a staggering 59%. The research suggests that the red meat segment lacks the overt cohesiveness of the dairy sector and suffers from fractionalised and competing interests, supply chain inefficiencies and an absence of price information transparency. Not surprisingly, the strategy concludes that “sector stakeholders need to transition to a longer-term strategic model where individual businesses act collectively to achieve sufficient scale…”.
At the same time, MAF and Statistics NZ estimate total deer numbers as at 30 June 2011 of circa 1.12 million – the lowest since 1993 (also due to pressure from competing land uses, volatile demand and prices).
Notwithstanding the sheep and beef segment’s dysfunctional idiosyncrasies and challenges for the venison segment, the combined categories are still a significant contributor to the New Zealand economy – accounting for 16% of total merchandise exports in the year ending June 2011 and some 28% of total agri-sector exports.
Looking forward, estimates are for venison prices to increase steadily through to 2015 and export value to improve to $310 million – largely due to improving conditions in EU economies (80% of export venison revenues) and a depreciating New Zealand dollar (source: MAF, Statistics NZ, NZX Agrifax).
Record lamb prices have reflected lower production in the European Union and in New Zealand and Australia. Beyond this year, international prices are expected to decline with increasing breeding stock in Australia. In New Zealand, sheep breeding numbers are expected to decline due to continued land use competition – but with lamb production per mated animal and carcass weight anticipated to increase slightly. Export revenues are projected to increase through to 2015 in anticipation of improved productivity, depreciation in the New Zealand dollar and demand for (higher price) chilled lamb (source: MAF, Statistics NZ, Beef+Lamb NZ).
The wool segment has been a stand-out performer in the year ending 30 June 2011 – increasing 30% in export value (year-on-year). International prices peaked in November 2010 due to a combination of lower export availability in Australia, a ban by China of wool product from South Africa, rising prices for competing fibres and global supply chain inventory adjustments (n.b. China accounts for 44% of New Zealand export demand). MAF predicts that constrained supply and rising global incomes should support a continuation of rising wool prices – with producer prices predicted to average 515 cents per kilogram between now and 2015 (source: MAF, Beef+Lamb NZ).
Prices for New Zealand beef in the US reached a record high in April 2011 – reflecting higher US feed costs and droughts in other competing beef production countries. MAF predicts prices to decline over the next two years and then increase as the pace of population driven demand picks-up – pushing export value to circa $2.6 billion by 2015. Leading agricultural sector bank Rabobank is picking US beef prices to reach record highs late in 2012 due to severe drought in the US south-west and consequent reduction of stock levels – with global meat protein supplies lagging income and population growth. The biggest single-market destinations for New Zealand beef exports are US, Japan, Indonesia, South Korea, Taiwan and Canada.
Data source: Ministry of Agriculture & Forestry, Statistics NZ, United Nations
