SOPI: Is this as good as it’s going to get?

The Ministry for Primary Industries (MPI) took the opportunity at this week’s National Fieldays in Hamilton to launch its latest Situation and Outlook for Primary Industries (SOPI) report for the year ending June 2015. Under current economic conditions, this signals the red meat sector may already have witnessed the best it’s going to get in the run up to 2020.

SOPI 2016The new SOPI report estimates that revenues from meat and wool will grow by just one percent to just under $9.1 billion in the year to end June 2016. Beef prices are picked to ease back from highs in 2015, while beef cattle and sheep numbers are expected to fall. Venison exports are supported by increasing shipments of higher-value chilled meat, it says, while wool exports are expected to remain strong based on demand from China.

Strong beef prices over the past two years in a row have driven increased slaughter rates and contributed to the meat and wool revenue rising, the report notes. “However, herd size decreases, as well as lower cow slaughter rates as dairy herds stabilise will contribute to declining production in the coming years.”

It predicts that beef prices will continue to come down from the 2015 highs due to recovering herds in Australia and the US, combined with increasing competition from Brazil. Export meat and wool revenue is forecast to drop to $8.3 billion in 2016/2017 and then rise to $8.8 billion by 2019/20.

Over the medium-term beef demand is expected to remain strong in the US and China, the world’s two beef largest importers, while export growth for New Zealand sheepmeat will be challenged by slightly declining sheep numbers, but global demand is expected to support prices from 2018, the report notes. Meanwhile, venison production is also being challenged by falling deer numbers, but herd rebuilding is underway and the industry is starting to see some benefit from successful marketing campaigns in Europe.

Increasing sales of chilled meat, which attracts a premium from customers, is seen as a way of lifting export revenue and SOPI noted price premiums of 68 percent for beef and veal, 51 percent for lamb and 114 percent for venison that were achieved in the year to June 2015.

It may take some time for full market access for chilled meat in China to be secured and for the industry to secure new sales channels. “But, if chilled export volumes were to increase significantly, it would provide a positive boost to export earnings,” the report suggests.

Overall, the new export figures for the primary sector show solid growth, with gains across the sector more than making up for recent declines in dairy prices, says Primary Industries Minister Nathan Guy.

“The SOPI report shows export revenue is expected to reach $36.7 billion in the year to June 2016, a rise of $1 billion from a year ago. This is a three percent increase and a pleasing result given the global volatility in dairy prices,” he said, adding that it shows New Zealand has a broad and diversified primary sector.

“Dairy export revenues is down six percent which is disappointing but no surprise given the global volatility in dairy prices. Issues like Russia’s trade sanctions, the removal of EU dairy quotas and low oil prices have all had an impact. However, MPI expects dairy export prices to gradually rise from December as global demand and supply begin to rebalance.

“Overall, MPI expects total growth in primary sector export revenue of just under 20 percent over the next four years which shows as a whole the sector is in good health.”

Crowds stream into Fieldays 

The SOPI report launch was just one event at Fieldays, which welcomed 28,058 people through the gates on the opening day for the annual event’s forty-eighth year, among them many New Zealand sheep, beef and deer farmers. Good weather kept the crowds streaming through the gates.

Fieldays was officially opened by deputy Prime-Minister and Minister of Finance, Hon Bill English along with Te Radar and New Zealand Fieldays chief executive, Peter Nation.

“Fieldays aims to bring town and country together and this is the real foundation for growth in the industry,” said Nation. “When you provide a platform for so many perspectives to come together to achieve a common goal, that’s the true meaning of collaboration and we’re proud to facilitate this over four days.”

Over 1,000 exhibitors showed their wares at the show. Among them were red meat companies AFFCO, Greenlea Premier Meats and Wallace Corporation, while Silver Fern Farms was handing out venison samples on the Hyundai stand. AgResearch, with an eye-catching golden cow and declicious meat chocolates that have both received plenty of attention, scooped the event’s Best Indoor Agribusiness Site award. Other sites of interest included OSPRI/NAIT/TBfree NZ, Ovis Management Ltd, MPI and the Ministry for Business, Innovation and Employment.

Those attending also had the opportunity to learn from various workshops and seminars. These included Doug Avery, The Resilient Farmer, presented in Fieldays Knowledge Series, sharing his valuable experience of resilience in industry. Eighteen years ago, Avery turned his life around after suffering from depression for five years. He now hopes sharing his experience will help to stop suicide rates in the agricultural industry from climbing. The Red Meat Profit Partnership also chaired a panel discussion each day on ‘Innovative approaches to improving practices in the red meat sector’.

Innovation and education are two founding pillars of Fieldays and a Careers and Innovation Hub was opened at the event by Bill English. This gives the chance for young people to talk to leading agribusinesses, he told the audience.

“If you take the opportunity to get involved with the Careers and Innovation Hub, you will learn many things  that we hope will encourage you to think strategically about a career in the primary sector,” he said.

 

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