Two emissions pricing options for farmers, as alternatives to being included in the Government’s emissions trading scheme (ETS) have been released for discussion.
“The outlook is positive. Fundamentals in key markets are solid, as strong demand and tight supply mean prices in export markets are forecast to lift for both sheepmeat and beef,” says B+LNZ’s chief economist Andrew Burtt.
The outlook also forecasts average farm profit before tax to lift 9% in 2021-22, reflecting a 4% lift in gross farm revenue and increasing sheep revenue, including a modest lift in wool prices.
“However, the forecast for a stronger New Zealand Dollar (NZD) will offset some of the buoyancy in New Zealand’s overseas markets and therefore limit increases in farm-gate prices,” Burtt explains.
China remains a critical driver of red meat export performance in 2021-22.
“Demand from China and the US underpinned solid export returns in the latter part of the 2020-21 season as the economic recovery in both countries has been rapid and fuelling consumer confidence.
“China’s demand for meat protein continues to be fuelled by pork shortages that have resulted in African Swine Fever (ASF) and also continues to be supported by growing consumer incomes and urbanisation,” says Burtt.
“Overall, the positive outlook is underpinned by the global economic and foodservice recovery and tightening global beef supply.”
The challenge in the new season remains the disruptions to supply chains and increased freight costs that are related to the global Covid-19 pandemic, the spread of the Delta variant and the impact on economic recovery.
B+LNZ forecasts New Zealand’s receipts from exporting red meat will be about $8 billion, slightly down on 2020-21. While lamb export receipts are forecast to increase by 2.2% on 2020-21, beef and veal export receipts are forecast to decline by 7%, driven by a decline in production and the adverse impact of the high NZD on export values.
“The red meat sector’s exports are critical to the New Zealand economy, and the COVID-19 uncertainty reinforces the need for stable and predictable domestic regulation to avoid putting pressure on the red meat sector.”
Farmer confidence is mixed. While on-farm profitability is positive, resilience is being tested by the volatility of adverse weather events and the extent of environmental regulation.
Farmers are expected to spend an average of $491,300 on goods and services for their farms, up 3 percent on 2020-21.