Ministry ups its forecast to $10.1 billion for red meat and wool exports

SOPI, March 2019

Red meat and wool sector exports are forecast to reach $10.1 billion in the June 2019 year-end, according to the Ministry for Primary Industries (MPI).

MPI’s latest Situation and Outlook for Primary Industries (SOPI) March 2019 update now says returns from red meat and wool exports will reach $10.1 billion, up nearly six percent on last year. The forecast for the 2020 year has also be revised upwards to $9.99 billion.

“Great pasture conditions this spring and summer have benefited the sector, with positive lambing percentages and above average slaughter weights this season,” the report says.

Red meat prices have continued to exceed expectations as the weaker dollar helps to increase export returns. “Lamb is the standout, on track for average export prices to exceed last year’s record prices by five percent,” says SOPI.

Strong international demand – especially from China – has helped maintain the previous year’s high prices, the report produced by MPI’s economic intelligence unit says. This is forecast to continue. On the supply side, a relatively flat New Zealand production forecast, combined with droughts and floods in Australia has constrained global beef and sheepmeat supplies, increasing prices further.

Strong venison and velvet prices are driving strong deer herd growth, while wool exports are forecast to increase 0.7 percent to $550 million in the year to end June 2018.

Trade tensions between the US and China, African Swine Fever in China and Brexit are all factors complicating the international trade scene, though SOPI says these are counterbalanced by increased opportunities, especially for higher value beef cuts, associated with the Comprehensive and Progressive Trans-Pacific Partnership. This came into force on 30 December and the second tranche of tariff cuts comes into effect on 1 April, bringing New Zealand’s exports to the Japanese beef market onto a level playing field with other competitors.

With Brexit falling at a critical juncture for the New Zealand red meat trade – just before the peak Easter period of supply for lamb – the report notes MPI is working via a New Zealand government Brexit taskforce to mitigate risks of a ‘no deal’ Brexit to the primary sectors and has put into place arrangements to preserve continuity in New Zealand’s trade conditions with the UK. MPI’s website provides regular updates and information for exporters

China is now the top destination for New Zealand’s red meat and wool exports (27 percent of exports), followed by the US (20 percent), the EU (excluding UK – 16 percent), the UK (six percent) and Australia (four percent).

“In the past six years, New Zealand’s exports have shifted away from the UK and towards China, where rising protein consumption is lifting imports of all meat and poultry,” says SOPI.

Overall, primary sector revenue is now expected to reach $45.6 million – 6.9 percent higher than the previous year and three percent higher than MPI’s December forecasts.

The increasingly positive outlook is driven by a strong production season and a renewed surge in dairy and meat prices. The SOPI report notes excellent growing conditions across much of the country have increased production estimates, particularly for dairy, sheep, beef and kiwifruit. In addition, import demand from China continues to strengthen for most primary industry products, even as some indicators show weakness in the Chinese economy and the tariff dispute between the US and China continues to hand over international trade flows. Strong or rising prices continue to be maintained across most sectors, with a weaker New Zealand dollar further boosting export returns.

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