Beef prices expected to firm

New Zealand beef prices are expected to firm over the next quarter, partly in response to tighter supplies resulting from the drought, but also to forecasts of a wet winter encouraging producers to retain stock, Rabobank said.

The specialised agribusiness lender said seasonal pressures still exist, but have since improved from the poor conditions in the first quarter.

Most regions received some good rainfall, with temperatures still warmer than average, which has enabled some good pasture growth, the bank said.

Rabobank animal proteins analyst Matt Costello said improved seasonal conditions during May and tightening of supply allowed prices to recover for most beef categories.

At the beginning of June, the North Island bull price averaged 395c/kg, slightly higher than the corresponding week last year, Costello said.

Costello said that while some areas had improved, there would still be tight feed and water supplies through winter in other regions.

Total beef slaughter for the New Zealand beef processing season, October to April, remained 20 per cent higher than the same period last year, at 1.53 million head, he said.

Following the same trend as the first quarter, the majority of the additional numbers processed were cows, with more than 600,000 processed during the seven months to April. This represents a 56 per cent, or 216,791 head, increase year-on-year, with the majority of the kill attributed to the dairy herd.

After drought was officially declared across parts of the North Island in February, with extremely dry conditions throughout most of the country, the Rabobank report showed slaughter volumes continued to track well above year-ago-levels.

Total New Zealand exports from January to April increased 21 per cent year-on-year, to 163,382 tonnes shipped weight, underpinned by strong demand for lean manufacturing beef.

"While the US accounts for more than half of New Zealand exports, shipments to China have certainly been a bright spot so far in 2013."

Exports reached 20,178 tonnes shipped weight, which is well ahead of the 1,211 tonnes sent last year.

Rabobank said global beef supplies will remain near 2012 levels, with a bias towards a minor increase driven by the Southern Hemisphere, led mainly by Brazil, Australia, Argentina, Uruguay and New Zealand, coupled with continued liquidation in US beef supply given the ongoing drought induced cow-herd liquidation. In addition, exports from India have moderated considerably, Costello said.

The broader picture for demand still points to tempered consumer appetite to paying high prices for beef as increases in disposable income worldwide appear to be slowing and threats of inflation continue across the globe, Costello said. The relative value position for beef has diminished as beef prices have risen relative to chicken and pork, he said.

 

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