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NZ's record beef prices set to continue into 2015, Rabobank says

Wednesday 31st December 2014

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Record beef prices are expected to continue for New Zealand farmers early in 2015, underpinned by tight supply and strong demand, according to Rabobank's latest quarterly beef report.

The North Island bull price averaged $5.44/kg cwt at the end of November, 36 percent higher than the same week a year earlier. The imported US beef price also remained around record levels at $8.22/kg for 95CL, the grade generally used in meat patties, which was 47 percent higher than the year earlier, Rabobank said.

Beef prices have hit record levels as drought-ridden American farmers rebuild their herds. The US, New Zealand's largest beef market, has its smallest beef herd since 1973 following several years of drought and high feed prices. While American farmers are now starting to rebuild their herds, the US Department of Agriculture doesn't expect the country's beef production to start increasing again until 2017.

"Very strong demand from the US continues to underpin the New Zealand beef industry, with record farmgate prices registered in November," Rabobank analysts Angus Gidley-Baird and Matt Costello said in the Beef Quarterly Q4 2014 report published this month. "The outlook remains very positive for the New Zealand beef industry for the remainder of 2014 and into Q1 2015, as supplies remain tight globally and demand strong."

New Zealand's upcoming free-trade agreement with South Korea will keep the local industry competitive with the US and Australia, who had already negotiated agreements, Rabobank said. The agreement was initialled by chief negotiators last week and is expected to be signed in the first half of next year ahead of ratification by each country's parliament. Australia's FTA came into force this month and the US has had an agreement since 2012.

New Zealand's agreement will see Korea's 40 percent tariff on beef removed in 15 years, in line with agreements secured by the US, EU, Canada and Australia, according to New Zealand's Ministry of Foreign Affairs and Trade.

Cattle slaughter in New Zealand rose 2 percent to 2.33 million head in the processing year from October through September, Rabobank said. Tight supply during the seasonal low months of July through September had supported higher prices and an increase in slaughter levels for the remainder of 2014 and into 2015 would likely dampen farmgate prices, it said.

Still, demand from the US remains strong, with shipments up 12 percent through the January to October period, compared with the year earlier, Rabobank said.


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