New Zealand beef export prices are forecast to remain strong through to 2017, with sheepmeat and co-products recovering from 2017, according to the Ministry of Primary Industries’ (MPI) latest Situation and Outlook for Primary Industries (SOPI) report.
MPI director of sector policy Jarred Mair says the SOPI 2015 report highlights the resilience of New Zealand’s primary industries and their growth prospects and provides a positive outlook through to 2019.
Export revenue for the meat and wool sector is estimated to be $8.757 billion for this year (ending June 2015) an increase of 8.2 percent on the year earlier. It is then forecast to dip to $8.543 billion in 2016, before climbing steadily to $8.963 billion in 2019 – a forecast increase of 10.7 percent from this year and a 16 percent increase over 2012.
“Most of the increase has occurred in 2015 after strong beef export revenue (up 30 percent) masked a weakening trend for sheepmeat and some co-products,” says the report.
It notes that the top 10 markets for New Zealand’s meat and wool in 2015 were the US, followed closely behind by China, the UK, Australia, Germany, Italy, Japan, Netherlands, Korea and Taiwan. China was the top customer for lamb and mutton and co-products, while the US took the top spot for beef and veal.
“Beef revenue is expected to maintain most of its 2015 gains until 2017, when global beef prices are forecast to soften as supply increases,” the report predicts. “Lower lamb production and weak demand for sheepmeat however, is expected to drive a fall in export revenue of 2.4 percent in 2016 to $8.5 billion. Growth is then expected to recover from 2017, led by recovery in sheepmeat and co-products offsetting the softer beef prices.”
Sheepmeat earnings are currently being suppressed by softer international prices and drought in parts of New Zealand. Growth is expected to resume in 2017. Meanwhile, the impact of Russian trade sanctions and the closure of manufacturing facilities in China have weakened global demand and prices for hides and skins, MPI suggests.
Export values forecast to lift for lamb, hides and co-products
The figures show that from 2015 to 2019, export values are forecast to lift by 5.5 percent for lamb, 8.9 percent for hides and skins and 5.8 percent for animal co-products. However, venison, mutton and beef and veal values will fall by 9.7 percent, 7.5 percent and 2.1 percent respectively.
New Zealand processors are continuing to find more value from the animal carcase through the extraction of co-products and there has been strong growth in exports of animal products for pharmaceutical and other uses, with export earning from these products increasing from around $4 million in 2005 to nearly $14 million in 2015.
New Zealand’s sheep flock size is expected to stablilise over the outlook period as dairy conversions slow. Total sheep numbers are forecast to be 28.4 million by June 2019.
While venison export returns have fallen by 6.8 percent on 2014 and further declines are projected out to 2019, the Passion2Profit Primary Growth Partnership programme is aiming to improve venison returns for deer farmers which may stop the decline of the deer herd. Velvet prices have reached very high levels this year as the product cemented its place as a premium product.
“This has gone some way to alleviate the below average returns for venison,” the report says.
Export revenue expected to grow
MPI expects that, for the year ending June 2015, primary industries total export revenue will be $35.2 billion, down eight percent from 2013/2014.
“This is despite substantial expected declines in export revenue for dairy (22 percent) and forestry products (19 percent decrease),” says Jarred Mair. “We then expect a return to growth with a 1.5 percent increase in export earnings for 2015/2016 to $35.7 billion.
“Longer-term, the outlook is for steady growth across all sectors. Total export revenues by June 2019 are expected to be $41.3 billion – a 17 percent increase on this year,” he said.
The last 12 months have been tough, he acknowledged, with volatility in overseas markets for some of our key export commodities and challenges to production from climatic events such as drought, storms and floods.
China remains New Zealand’s most important market for primary industry exports,
“There’s no denying that it’s hard going right now for some of New Zealand’s primary industries, but we are forecasting better times to come,” says Mair.
The decrease in dairy and forestry revenues has been offset partly by an increase in export returns for meat, which is up eight percent, seafood, horticulture and other industries.
You can download a copy of the SOPI 2015 report here.