Primary industries stakeholders are welcoming the new Free Trade Agreement (FTA) with the United Kingdom announced today.
However, there is a prediction that average farm incomes could be down.
Beef + Lamb New Zealand’s (B+LNZ) mid-season economic update shows that beef exports are expected to pass $4 billion for the first time, lifting 18% to $4.6 billion.
At the same time, a lift in the average export value for lamb offset a lower lamb crop in 2019, resulting in a 4% lift in total lamb export receipts to $3.54 billion. Combined exports for beef and lamb for the season is estimated at just under $9 billion.
B+LNZ’s chief economist Andrew Burtt says while the drought and COVID-19 have both had impacts for farmers and meat processors, the fundamentals are looking likely to remain strong for New Zealand sheepmeat and beef exports this year.
“Red meat is expected to remain a key component of many diets and African Swine Fever (ASF) in China continues to drive a shortage of pork, which underpins solid demand for beef and sheepmeat imports there.”
Burtt says shifting market access dynamics have the potential to change the distribution of beef exports this season. He says the US is forecasting a significant lift in beef exports and has gained improved market access to China and Japan, though US exports have currently been significantly impacted by COVID-19 due to the closure of meat processing plants.
“This may increase competitive pressure for NZ beef in some markets but has the potential to create opportunities in others. Brazilian beef has recently regained access to the US market, increasing competition on the US imported beef market.
“However, a significant reduction in Australian sheepmeat and beef production will provide some support for demand for New Zealand red meat in key markets during 2020,” he says.
On the home front, the beef herd grew by nearly 5% to 3.9 million as at 30 June 2019. Sheep numbers were down by 0.8% to 26.7 million.
In terms of farm incomes, B+LNZ says farm profit, before tax and adjusted for inflation, is forecast at $104,400 – down 20% on the 2018/19 season. However, Burtt says this figure was arrived at before the escalation of the COVID crisis.
He notes the uncertainty of the times ahead, but says NZ livestock production and red meat processing sectors continue to deliver products that meet customer needs.