Monday 29th January 2018
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Rain over the summer holiday period has provided some respite to farmers over most of the country and slowed the volume of animals being sent to slaughter, underpinning prices, according to AgriHQ's Monthly Sheep & Beef report for January.
"Confidence in farmgate sheep and beef prices was waning in the fortnight leading up to Christmas, but the situation has stabilised since the holiday period," AgriHQ analyst Reece Brick said in his report titled 'Timely rain steadies the ship'. "Many areas of NZ that were struggling through an extended dry period received a significant volume of rain after Christmas and are now well poised for the coming weeks."
The impact of the rain is already being felt at the farmgate level, with supplies shrinking and demand lifting, which was pushing up some prices, he said.
The situation in January contrasted with December, when there was a backlog of cattle and sheep at processing plants extending beyond two weeks as farmers sought to offload stock due to dry weather, which had caused prices to fall, he said.
"Supply dynamics are changing. More and more farmers are opting to hold onto stock for further weight gain, and the large backlogs are shrinking week-by-week. This has already impacted on North Island mutton prices, which lifted 10c/kg since the New Year."
In his weekly commentary on the livestock market published Jan. 26, Brick noted the contrast between the North and upper South Island, and the lower South Island where dry conditions prevailed.
"Mother Nature continued to throw a helping hand out to the rural North Island this week," he said in his latest weekly Livestock Insight report on the North Island. "Nearly all areas received some form of moisture, with the majority falling in the western and upper-central areas of the island, which happened to be the driest regions compared to normal."
For the cattle market in the North Island, the contrast from a month ago couldn't be more extreme with processors continuing to cut shifts and work part weeks at plants throughout the island as they struggled to procure stock, prompting some to lift their prices.
There were more buyers looking for store cattle than sellers looking to offload numbers, with activity in paddocks and stock yards at a lull, he said.
"No-one is in a rush to sell while grass is a non-issue, and although the market is good, the majority are still preferring to opt for weight-gain rather than take the cash now," he said.
Lamb slaughter volumes are well down on usual and the mutton kill was also fairly subdued, he said.
"Most areas have enough grass for at least a month longer, and enticing non-contracted lambs out of the woodwork has proven difficult," he said. "Backlogs have all but disappeared at plants, with only contracted lambs adding some spine to numbers."
The lack of lambs at saleyards had prompted some buyers to consider buying stock from the South Island, although transport costs meant there was "zero price advantage", Brick said.
Meanwhile, in his weekly South Island livestock report, Brick noted Southland and Otago continued to be hurt by dry weather.
"The pressure has mounted on those through Southland and Otago, where thoughts of getting rid of stock have turned into action," he said. "A little relief came in the form of a few showers that mainly swept over western Otago late last week/early this week, but it's all too little too late.
"The two halves of the South Island couldn't be in more of a contrast. The upper-half are just taking the season at their own pace, often opting to put a bit more weight on their lambs while they have the feed to do so. Lower down the offload button has been hit with a vengeance. It's only a lack of growth through the past month which is preventing backlogs from bloating to ridiculous levels."
Overall, Brick noted the strength of the New Zealand dollar was constraining price gains, although he said there is the potential procurement competition will stabilise slaughter prices.
"International markets have proven resilient in the face of heavy supplies out of NZ. Of particular note is US beef market, which has managed to absorb NZ production without any further downside. Positive consumption levels within the US, consistently strong exports out of the US, somewhat limited supplies from Australia and competition from Asian markets have all contributed to this trend."
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