Mecardo Analysis - Getting by with a little help from our NZ friends
- By: "Farm Tender" News
- Ag Tech News
- Aug 30, 2018
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By Matt Dalgleish | Source: Stats NZ, B+L NZ, Mecardo
Across the ditch the switch from sheep to cattle continues with Beef and Lamb NZ forecasting further growth in the beef herd at the expense of sheep/lamb. At a time when Asian demand for sheep meat is on the rise the reduction in supply from our only real international trade competitor is helping support domestic lamb and sheep prices.
Results from the NZ stock number survey, released mid-year, shows that Kiwi producers continue to reduce the size of their breeding flock with breeding ewes expected to decline 2.1% over the 2017-2018 season to 17.4 million head – Figure 1. A key consideration cited for the reduction in breeding ewes has been the robust mutton prices over the first half of 2018 encouraging farmers to switch attention to less labour intensive options than breeding ewes.
On the back of the lower breeding stock the forecast lamb crop is anticipated to decline 3.8% to 22.8 million head. The net result of the contraction in breeding ewes and lambs born pushing the total sheep flock in NZ to a new low at 27.3 million head, or a decline of 0.8% - Table 1.
Analysis of the annual change in NZ sheep and lamb numbers over the last fifteen years highlights a distinct pattern of declining supply as producers in some areas move from sheep to cattle, as evident by the forecast 1.9% increase in the beef herd. Despite the annual decline in breeding ewes/lamb crop this season being unable to match the magnitude of the 2016, 2011 and 2009 seasons, at around a 5% decline for breeding ewes and 10% decline for the lamb crop, it remains significant enough to have an impact on the overall flock size – Figure 2.
A rising sheep offtake ratio suggests that the rebuild of the Australian flock stalled into Winter as the dry conditions in NSW made it difficult to continue to grow numbers. However, robust wool and sheep meat prices will encourage a flock rebuild once the climate returns to a more favourable setting. The breeding intentions from the AWI-MLA Sheepmeat February survey signaled that 29% of Australian producers were intending to increase the flock, and while this may have been derailed by the dry it’s likely to return once conditions allow.
Key points
* NZ flock of breeding ewes is forecast to decline 2.1% over the 2017-18 season.
* The reduction in the breeding stock will see the NZ lamb crop reduce by 3.8% to 22.8 million head.
* A declining NZ supply of sheep meat will encourage offshore buyers to source more product from Australia.
What does this mean?
In global export terms Australia and NZ supply around 70% of the market and in many of Australia’s key international markets NZ is our only real competitor. OECD forecasts for the next five years suggest that demand for sheep meat from Asia is set to average around a 2% growth rate, annually. While this doesn’t sound like much the trade into Asia was more than US$2.1 billion last season, so it represents a significant chunk.
With NZ supply forecast to continue to decline the demand from offshore will need to find a source country to secure product and Australia is the obvious solution. Australian mutton exports into Asia have been tracking 16.6% above average during 2018 and lamb exports have been even more impressive, running at 35% above average. Asian demand for our sheep meat has helped underpinned the solid prices sheep producers have enjoyed this season and with the NZ sheep industry continuing to contract there is not much to suggest this won’t continue.
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