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Beef and veal production up and prices high

Beef and veal production up and prices high – in the short term

Beef and veal production rose for the year ended September 2004, according to the Ministry of Agriculture and Forestry’s latest situation and forecasting report on the sector.

The 2004 Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) report into beef and veal production finds, however, that while production is up and export prices are currently good, they are likely to fall in the medium term.

SONZAF is an annual roundup of New Zealand’s main agriculture and forestry industries, covering the major issues and trends, the current situation and the medium-term outlook. Each article is written by an industry specialist, and incorporates both modelled price, production and export projections with industry intelligence. One particular feature of SONZAF is that it includes projections based on two alternative exchange rate tracks as well as the main projections. This enables readers to better understand the prices that could result should exchange rates differ from those used in the main projections.

The report’s author, Senior Policy Analyst Rod Forbes, says free-on-board (FOB) prices initially fall out to 2006, but then rise out to 2008, thanks largely to an expected depreciating exchange rate.

Mr Forbes says the increased production of beef and veal this year was mainly due to an unusually high adult cattle slaughter – because of a carryover of steers and bulls recoded in the June 2003 Agriculture Production Survey, and secondly because the rate of dairy herd expansion is slowing and there has been some additional culling of dairy cows.

The report finds New Zealand was able to export an additional supply of high-value beef to North Asian markets due to bans on Canadian and United States product following the discovery of bovine spongiform encephalopathy on one farm in each country.

While conditional agreements to resume trade between North America and Japan were reached in October this year, it will be many months before trade takes place, and agreements are still to be reached with Taiwan and South Korea.

New Zealand cow beef prices in the United States reached a record high for the September quarter, due to constrained domestic supplies on the US beef market and stronger domestic demand.

“Despite this rise in cow beef prices, schedule prices were little different from the previous year, though, due to the strength of the New Zealand dollar against the Greenback,” Rod Forbes explains.

Looking out to 2008, the SONZAF report says beef production is set to decline, due to a fall in beef cattle numbers in favour of sheep and dairy cattle.

“Cow beef prices in the US are also projected to fall over the outlook period because of a corresponding fall in US beef prices, a rise in US beef production and a demand shift from imported to domestic supply,” says Rod Forbes.

Key Facts from SONZAF 2004 report on beef and veal production

Production increased by seven percent for the year ended Sept. 2004 because of an additional 183,000 adult cattle slaughtered and a 0.7 percent rise in average carcass weight.

The distribution of adult cattle slaughter for the year to September 2004 was 33 percent cows, 26 percent bulls, 22 percent steers and 19 percent heifers.

Veal production, predominantly from bobby calves, represents three percent of total beef and veal production. In the year ended September 2004, the number of bobby calves sent from dairy farms for slaughtering fell by nine percent. This is an indication that a greater number of bull calves are being reared for finishing-to-slaughter-weight.

Beef and veal exports were provisionally 612,000 tonnes on a carcass weight (cw) basis for the year ended September 2004 – up 13 percent on last year.

On an export value basis, beef and veal generated $1.92 billion. While the US market dominates export quantities and values, exports went to 98 other countries.

For the year ended September 2004, prices for imported New Zealand 90 percent chemical lean beef averaged 264 US cents per kilogram – an increase of 32 percent from the previous year.

Production is estimated to decline 17 percent for the year ending September 2005 – due largely to a reduction in dairy cow slaughter numbers.

For the remainder of the outlook period, production is projected to fall three percent.

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