Dry summer weather prompts farmers to offload stock

Dry summer weather is denting grass growth, prompting farmers to reduce their livestock numbers, with the increased volumes of animals hitting the market starting to weigh on prices, according to AgriHQ's Monthly Sheep & Beef report for December.

"The common factor pulling values down throughout NZ is the weather," AgriHQ analyst Reece Brick said in his report. "It was a rapid transition from a particularly wet early spring into one of the driest late spring/early summers in recent years, catching many farmers off guard."

For the sheep industry, below-average growth rates through November kept a lid on the number of lambs being sent to slaughter, keeping prices higher than anticipated. However numbers were now coming forward in significant volume and the long awaited fall in prices has finally begun, Brick said, noting that meat companies had dropped lamb slaughter prices by 15-20 cents per kilogram over the past fortnight, bringing the price to $7.10/kg.

"A swift reversal has occurred in the past fortnight," Brick said under the headline 'Spring lambs begin to flow'. "Rapidly drying conditions have created backlogs of more than a week throughout the country. This is set to be the norm over the remainder of the year."

Lamb slaughter prices remained 25-30 percent above the five-year average, he said.

Meanwhile, strong mutton prices drew much larger than usual numbers of ewes to slaughter and processing space is now "extremely limited", with values correcting downwards as a response, he said.

In the store lamb market, where farmers buy animals to fatten and onsell, limited grass growth in the past month had caused an over-supply of lambs with more downside likely through the remainder of the year, he said.

However, Brick said increased supplies into international lamb and mutton markets haven't made much of a dent in export returns just yet, as interest from all markets remains at least as firm if not firmer than a month ago.

In the cattle market, bookings at cattle processors had exceeded capacity over the past two to three weeks though slaughter prices haven't fallen too far, Brick said, noting that meat companies wanted to reduce schedules before the new year, so more downside is highly likely.

"The brakes have been released on the NZ cattle kill over the past fortnight," Brick said under the headline 'Offload button hit on cattle'. "Production through early and mid-November was moderate but encroaching dry conditions have given farmers incentive to destock cattle.

"The impact of the increased supplies is only just being felt through slaughter prices. A low NZD/USD combined with a surprisingly firm overseas beef market gave export processors enough of a margin to prevent any downwards movement. However, export returns have taken hit recently and reducing schedules is the only way processors can maintain these margins in the short-term."

Meanwhile, "store cattle were faring well through the majority of November, but have come under major pressure in the past fortnight purely due to the dry on-farm conditions," Brick said.

(BusinessDesk)