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NZ beef export market faces headwinds, AgriHQ says

NZ beef export market faces headwinds, AgriHQ says

By Tina Morrison

Aug. 8 (BusinessDesk) - Headwinds are building for New Zealand exports of beef, the country's largest meat export, according to AgriHQ.

The outlook for beef prices is weakening in the US, the largest market for New Zealand beef, after a United States Department of Agriculture report showed cattle numbers at a nine-year high as farmers rebuild their herds following heavy culling in 2014 and 2015, with most of the increase in beef cows rather than dairy cows. Elsewhere, Japan has temporarily lifted the tariff on frozen beef from New Zealand, rival exporter Australia has increased supplies, and a rise in the New Zealand dollar is hurting margins, according to AgriHQ's monthly Sheep & Beef report for August.

"Sentiment in the US towards imported beef has turned negative, largely on the belief that US domestic prices will weaken in the next few months," AgriHQ analyst Reece Brick said in his report. "Importers are very reluctant to buy on the current market, with exporters reporting very limited interest over the past fortnight.

"This view is predominantly driven by weaker beef futures as well as production forecasts which paint a picture of increased supplies through the back-end of this year."

The price for 95CL imported bull beef dropped to US$2.27 a pound this month, from US$2.38/pound last month, according to AgriHQ data. The price for imported 90CL cow meat slipped to US$2.18/pound from US$2.20/pound. Still, prices remain above year-earlier levels with 95CL last year at US$2.25/pound and 90CL at US$2.10/pound.

AgriHQ's Brick noted that the rising value of the kiwi dollar was "an extra thorn" in the side of exporters, with the local currency recently hitting its highest value against the US dollar since May 2015.

"The appreciation of the New Zealand dollar has eaten into processor margins, and there's an active attempt throughout New Zealand to decrease slaughter prices as a result," he said.

In Japan, the tariff on frozen beef has been lifted to 50 percent from 38.5 percent until the end of March next year after "exceptionally high" sales of imported beef, with beef imports in the year to June at the highest level for the country since 2003, Brick said. This means New Zealand exporters will be forced to find alternate markets to divert product into, he said.

ASB Bank senior rural economist Nathan Penny noted that the Japanese tariff change was likely to put a spanner in the works for local beef prices, as Japan is New Zealand's highest paying export market for beef. The average beef export price in the Japan market for the September 2016 year was almost 20 percent higher than the next-best market, and around 45 percent higher than prices in the US, he said.

Australian beef is exempt from the tariff hike on the back of its trade agreement with Japan, so New Zealand and the US will bear most of the brunt of the increase, Penny said.

In Australia, the national beef kill is continuing back towards its five-year average at a steady pace as the country rebuilds its herds following droughts.

(BusinessDesk)

ends

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