New Zealand lamb export value up 14pc. Image – B+L NZ.

NEW Zealand’s lamb exports are expected to break the $3 billion mark for the first time this financial year, but wool returns remain disappointing, according to Beef + Lamb New Zealand.

High lamb, mutton and beef prices will bump up this season’s forecast profit for sheep and beef farmers, the Beef + Lamb New Zealand’s (B+LNZ) Mid-Season Update has reported.

The milestone for lamb exports is predicted to be reached on the back of a forecast 14 percent increase in average export value. NZ’s beef export receipts exceeded the $3 billion mark in 2014-15 and are expected to be $3.2 billion in 2017-18 – down 1.1pc.

B+LNZ chief economist Andrew Burtt said the average auction price for fine wool is expected to increase by 25pc, but a 20pc decrease in the average price for strong wool will bring the overall average wool price down by 1pc.

Mr Burtt said B+LNZ’s Economic Service forecast of farm profit before tax has been revised up to $126,300 for the All Classes Sheep and Beef Farm in 2017-18 – up 39pc on 2016-17.

“Sheep and beef prices have stayed strong despite increases in the number of sheep and cattle processed so far this season.

“This demonstrates that international meat markets have been strong,” he said.

“However, improved pasture availability and tighter remaining livestock availability will support prices for the remainder of the season.

“Strong wool continues to perform poorly while fine wool has improved,” Mr Burtt said.

“The fast start to the season has been a significant feature of the production year so far.”

For the December 2017 quarter, the numbers of lambs, sheep and cattle processed were all up, leaving fewer to be available for January to September compared to the 2016 17 season.

Lamb returns continue to rise

The B+LNZ update said revenue from sheep, which is a major driver of the improved farm profit before tax, is expected to be up 22pc and contribute 47pc of All Classes Sheep and Beef Farm revenue.

The average farm-gate price for lambs has been revised upwards to 661c/kg or $122 per head – up 15pc on last season – due to the higher proportion processed earlier in the season at good prices. The forecast at the start of the season was 555c/kg.

The average lamb export value is expected to reach $9800 per tonne – up 14pc on last season – while export volume has remained steady – up 0.7pc.

Mr Burtt said total mutton receipts are also forecast to be up strongly – by 11pc to $602 million.

“A 24pc increase in the average value per tonne to $6500 more than offsets the forecast 7.3pc drop in mutton export volumes.

“These factors have supported strong farm gate prices for mutton, which are estimated to be up by 37pc to average 394c/kg for the 2017-18 season,” he said.

Mr Burtt said tight sheep meat export supplies from New Zealand and Australia are driving the strong export receipts. The two countries account for around 90pc of international sheep meat trade, excluding intra-European Union trade.

In the December quarter, the number of NZ lambs processed was up 13pc and the number of adult sheep processed was up 15pc. The higher production was driven by the good farm gate prices and dry conditions in many regions.

As a result, B+LNZ’s Economic Service forecasts availability of lambs and adult sheep for the remaining January to September period to be down 2.2pc and 17pc respectively.

NZ beef prices remain strong

After total beef export receipts passed the $3 billion mark in 2014 -5, they have remained steady and are expected to be $3.2 billion in 2017 18, Mr Burtt said.

“A rise in average value per tonne to $7,100 – up 3.2pc –  will offset the forecast 4.6pc decrease in beef export volume.”

Export beef production is expected to dip for the 2017-18 season at 590,000 tonnes – down 1.3pc – due to a slight decrease in average carcase weights (-0.7pc) and slightly fewer cattle processed ( 0.6pc).

The average cattle farm gate price is forecast to be 529c/kg – up 6.9pc.

The US dollar is expected to strengthen through 2018, supporting good returns from the US and China, which are New Zealand’s largest beef export markets. Increasing Chinese demand is helping to accommodate the global increase in beef production.

Read the B+LNZ mid-season update 2017-18

Source: Beef + Lamb New Zealand.