Weaker NZ dollar insufficient to offset lower prices

Weaker NZ dollar insufficient to offset lower international prices

18 April 2016

The first half of the 2015-16 meat export season ended on 31 March 2016 and analysis by Beef + Lamb New Zealand's Economic Service shows that red meat (including beef, veal, lamb and mutton) export revenue is down, despite increased shipments and some depreciation of the New Zealand dollar (NZD).

October 2015 to March 2016: Beef & veal, lamb and mutton exports

Beef: Strong sales to North Asia continue

Compared to the same period last season, New Zealand beef and veal shipments were down 3.7% in the first six months of the 2015-16 season. This was despite being up 15% in the first three months. Chilled export volumes remained unchanged, with all the decrease due to lower frozen shipments.

The average value in NZD of chilled beef exports was up 11% in the first half of the season, while frozen beef exports averaged 4.3% less than the same period last season. It is important to note that these variations include the gains from a softer NZD. When looking at the exports traded in USD (the most common currency in which New Zealand beef is exported), the average value expressed in USD was down 3.9% for chilled New Zealand beef and 18% for frozen. This highlights that average values in NZD would have been down considerably more on the previous season, without the NZD depreciation.

The volume of exports to North America – the largest destination for New Zealand beef and veal exports – was down 15% in the first half of the season, with the majority of this decrease occurring over January to March 2016.

After a tremendous 55% increase in shipments to North Asia in the first quarter of the season, exports continued to increase, but at a much lower rate in the second quarter (+5.5%). Overall, in the first six months of the season, exports to North Asia were up 24% on the same period last season. The majority of this increase was to China and, to a lesser extent, Taiwan. Exports to Japan were down.

The graph represents the value of beef exports to North Asia for the latest five seasons. The grey areas represent the value of exports from October to March and the green areas the value of exports for the rest of the season – from April to September.

Lamb: Large shipments in the first half of the season

New Zealand lamb export returns totalled $1.38 billion between October 2015 and March 2016 – up 1.5% on the same period last season. Returns were boosted by large shipments (+5.9%), courtesy of an early processing season in New Zealand and a softer NZD. Exports were significantly higher than last season from October to January, but were down during February and March 2016.

Shipments to North Asia and the European Union increased significantly – up 11% and 7.2%, respectively. This was partly offset by lower shipments to the Middle East. In the first six months of the season, lamb exports to the Middle East reduced by about a third, compared with the previous season. This reduction was accompanied by a decline in the average value of lamb exports – down 10%.

Chilled lamb export volumes were up 12% in the first six months of the season, while frozen lamb exports were down 3.6%. Chilled lamb exports accounted for 29% of lamb shipments in the first half of the season – up from 27% over the same period last season.

Over the first half of the season, the average value of lamb exports was down 4.2%, despite a softer NZD partially offsetting the decrease in international prices. Without the effect of the softer NZD, average values would have been down about 14%, instead of 4.2%.

Mutton: Mutton shipments remain unchanged

Mutton export volumes remained broadly unchanged (+0.5%), at 51,200 tonnes in the first half of the season. Export volumes to New Zealand’s largest destination for mutton exports, North Asia, were down 9.4%, while exports to the European Union, South Asia and North America all increased significantly.

In the first six months of the season, the average value of mutton exports decreased 10% compared with the previous season. The largest decrease in average value occurred in North Asia. However, decreases occurred in all major regions.

Please note that, unless noted otherwise, all export values quoted are FOB (free on board) and in New Zealand dollars, and all volumes are in tonnes shipped weight.

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