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Japan's move to increase tariffs on beef imports is a "spanner in the works" for New Zealand beef prices.
In ASB’s latest Farmshed Economics report, economists said prices were likely to drift lower over the remainder of the year.
On the back of surging beef imports, Japan had moved to lift the import tariff from 38.5% to 50% which would hurt overall export prices, as Japan was the highest-paying of New Zealand’s major beef markets.
The average beef export price in the Japanese market was more than 20% higher than the next-best market, and nearly 50% higher than prices in the United States, New Zealand’s largest market.
As a result of the tariff move, beef prices were likely to struggle to reach the $6 a kg mark this spring as had been hinted at in previous reports.
Beef prices (P2 steer per kg) had already dipped 2.6% over the past month, before the Japanese tariff announcement.
There were signs lamb prices might be closing in on a peak. Over the month, per kg prices lifted 1.5%, a more modest rise compared with the 5%-plus rises of previous months.
Still current prices were in stark contrast to last year’s levels. As they stood, prices represented a circa 25% increase on last year.
The ANZ commodity price index slipped 0.8% in July, but international prices still remained 21% higher than in July last year.
Dairy prices increased 1.4% in July, led by milkfat prices — specifically butter (up 5.2%) and cheese (3.4%). Milk powder prices were largely unchanged and casein fell 1.9%. Records for milkfat prices had been posted in recent months as insatiable demand in developed markets and softer European milk supply limited their export volumes.
Seasonality had ensured tight Australasian supply, too, and Asian demand from a range of sources had driven tradeable milkfat prices to new highs.
Meat prices fell for the first time this year, down 3.4%. The decline was led by lamb prices which dropped 6.8%.
Lamb leg and forequarter prices declined as new season northern hemisphere production rose and valuation concerns in lower income markets affected prices.
Although commodity prices were showing signs of levelling out, the rise from a year ago was still stark, ANZ agri economist Con Williams said.
"With the construction sector still booming, but not incrementally adding more to growth as capacity constraints bite, buoyant commodity prices will act as an important substitute," he said.