Top Performing Farms Thrive Despite 27% Increase in Operating Costs
The cost of running a New Zealand farm is now 27% higher than it was before Covid, putting sustained pressure on profitability acrfoss the sector, according to new ANZ research.
For sheep farmers in New Zealand, securing killing space at processing plants and feed are posing major challenges.
ANZ agricultural economist Susan Kilsby says lamb processing is running well behind normal due to labour issues curbing meat-processing capacity.
Kilsby says this means there are still more old-season lambs on farm as the new lambing season gets underway.
"Many farms are now having to cope with still having some of last season's lambs on farm as the new lambing season commences. Muddy paddocks are making it very difficult to deliver lambs to processors in clean condition, which has also kept some lambs on farm," she explains.
"Available feed tends to tighten up at this time of the year and the recent flooding has further impacted feed availability. This will be a bigger problem on farms that have not been able to get lambs to processors in a timely manner.”
On the global scene, export markets for lamb are starting to feel the pressures of policy designed to dampen down inflation.
Kilsby says to reduce inflation, demand needs to ease.
“This does mean we expect to see some reduction in demand for our export products – particularly more highend products such as meat destined for the restaurant trade,” she told Rural News.
“At this time of the season there isn’t that much product to sell, but even with low volumes we are starting to see a little bit of pressure on international prices. Prices are expected to come under more pressure later in the season when our export volumes lift.”
However, she notes that despite in-market prices starting to ease, schedule prices for lamb and mutton continue to creep up.
“But these prices are only relevant if you can actually get processing space for your lambs,” Kilsby adds. “The range of prices being offered by various companies is also opening up a little, but overall throughput is very low so current prices don’t have a significant impact for most farmers.”
For beef farmers, global demand is steady, but the lack of demand from US importers is resulting in more New Zealand beef being sold into Asian markets.
Kilsby says pricing has softened a little due to the reduced competitive pressures from US buyers, but there is sufficient demand to absorb the relatively low volumes of beef being exported from New Zealand at present.
“Processing backlogs are starting to clear, but many farmers have had to winter more heavy cattle than would have preferred, given the wet conditions underfoot.”
While the US market isn’t buying a lot of NZ beef, demand from China remains robust despite the recent lockdowns. Kilsby says Chinese importers will continue to build up stocks leading up to Chinese New Year, which should keep demand from this market steady for the next few months.
“This market is certainly providing greater returns than the US market at present, however, the pricing is not quite as strong as it was earlier in the season. Having two large markets for beef has been very favourable for exporters, as when demand has dropped off in either the US or China, demand from the other market has tended to be pretty robust.”
