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NZ cow slaughter rates rise, weighing on prices, as M. bovis culling spreads

Tuesday 15th May 2018

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New Zealand cow slaughter rates are tracking ahead of last year as the compulsory culling of cattle on properties infected with Mycoplasma bovis swells volumes, weighing on prices.

The outbreak was reported in New Zealand for the first time in July last year, and the Ministry for Primary Industries has so far ordered the slaughter of cattle from 39 infected properties. The ministry expects to make a decision by the end of this month on whether to continue with attempts at eradication or switch its focus to managing the disease.

"The attempted eradication of the M. Bovis disease from NZ is disrupting the local market," AgriHQ analyst Reece Brick said in his monthly sheep and beef report. "More than 11,000 cattle (primarily dairy cows) have already been processed, but the number of farmers under quarantine is rising rapidly. Either a lot more cattle will need to be culled or attempts to eradicate the spread will be cancelled."

Official data for the four weeks to April 14 show 145,600 cows were slaughtered nationwide, up 21 percent on the same period last year although 2 percent below the five-year average, AgriHQ said. 

The kill season for cows generally starts in March and runs through until the end of May with farmers selecting their least productive dairy cows for slaughter as they prepare for the winter months when there is less feed available. Farmers tend to cull heavily during periods of low milk prices, and stock numbers are typically reduced ahead of Gypsy Day, which marks the new dairy year when farmers move their cows to winter grazing land and many sharemilkers settle their old milking contracts and embark upon new ones.

"For NZ processors all focus is on the annual dairy cow kill," Brick said. "Within the North Island there's been nothing too out of the ordinary with normal seasonal culling underway. The usual combination of slower winter grass growth and the approach of Gypsy Day have prompted dairy farmers to cull in solid numbers. In the South Island it's much busier compared to past years. Poor pregnancy rates there and the compulsory culling of cattle from M. Bovis affected farms is bloating supplies."

As expected, the laws of supply and demand have pulled slaughter prices down, Brick said, noting weakness was more prevalent in the South Island.

Meat processors were offering $4/kg for North Island cows last week, down from $4.05/kg last month and $4.30/kg at the same time a year earlier, AgriHQ said. In the South Island, processors offered $3.65/kg, down from $4/kg last month and $3.95/kg last year.

Bull prices also fell, with North Island processors offering $5.10/kg, from $5.30/kg last month and $5.60/kg last year. In the South Island, the price fell to $4.90/kg, from $5.10/kg last month and $5.15/kg last year.

Within the global market, supply levels were causing uncertainty with both Australia and the US slaughtering cattle at elevated rates, Brick said. New Zealand's national bull kill totalled 42,750 in the four weeks to April 14, up 39 percent on last year and 50 percent up on the five-year average.

Brick noted that the profit margins on manufacturing beef from bulls and cows were very slim for processors through most of April, pulling the schedule prices for these classes down the furthest. Export prime was a somewhat sheltered from the impact of the large cow supplies, though this was based on limited throughput, he said.

"There does appear to be some light at the end of the tunnel for beef farmers," Brick said. Export returns on manufacturing beef improved drastically in the last few weeks, while bookings of cattle to slaughter have begun to slow, he said.

"Processors are expected to remain busy through until early-June so any upswing is unlikely in the short term, but the market should at least stabilise in the coming weeks," he said.

The developing efforts to eradicate the Mycoplasma bovis disease could play a key role in beef production in the next three months as the Ministry for Primary Industries decides whether to continue culling cattle from infected properties, Brick said.


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