Meat industry expects to profit

Meat companies are expected to report healthy financial accounts in the coming weeks, but they will be tempered by prospects of difficult years ahead from falling sheep numbers.

Meat and Wool New Zealand has reported 1.2 million more adult sheep have been killed so far this season compared to last, due to drought and land-use change from sheep to dairying.

Listed company Affco reported last week it was experiencing strong market demand for sheep, beef and venison, which was being helped by better market conditions and a lower exchange rate.

In a market announcement, chief executive Stuart Weston said he expected the second half of the financial year to exceed the first.

In the six months to March 31, it reported a $15.2 million operating profit before interest and tax compared to an $18.7 million loss for the corresponding period a year earlier.

Silver Fern Farms and Alliance Group also report improved market conditions and expect better financial performances than last year.

Companies were benefiting from a higher kill following drought in the North Island and land-use change from sheep and beef to dairy in the south of the South Island.

Meat and Wool New Zealand economic service director Rob Davison said with two months to go until the end of the 2007-08 meat season, the lamb kill was steady at 25 million but the mutton kill was up about 1.2 million at 5.9 million and the beef kill 3% higher.

The higher sheep and beef kill was not all to do with land-use changes.

"Don't underestimate the impact of drought, particularly in the North Island. Some of that will be recovered," Mr Davison said in an interview.

While financially this year looked promising, he said next year would be more difficult, especially with a lower breeding ewe flock.

While figures were being finalised, the number of prime lambs available for slaughter next summer was expected to fall from 25.5 million to 22 million, with two million fewer in the South Island and one million in the North Island.

The first half of the financial year was difficult due to the high exchange rate, but conditions improved late in the season.