By Allan Barber
The pre Christmas surge of optimism, boosted by high beef and sheepmeat prices when export volumes were low, has largely disappeared.
The impact of the drought in the lower North and South Islands has seen slaughter numbers increase dramatically at the same time as a series of negative events have reared their head in world markets.
Unfortunately nobody foresaw such an adverse combination of events coinciding at the same time, although our weakening dollar made a positive difference.
Drought always pushes stock prices down because available processing capacity, even in these times of excess capacity, can’t handle the livestock numbers farmers need to get off their farms; overseas customers know they are in the driving seat and, naturally enough, pay no more than they must.
Therefore, except for supply contracted at a committed price, it makes good business sense for processors to drop the schedule.
This compensates for the weeks when they must pay premiums to secure throughput.
History tells us the effects of a drought only have a limited if any impact on stock numbers from one season to another; drought merely concentrates or stretches the shape of the kill like a concertina.
Market factors having an effect on the prices processors are able to pay include, in no particular order, slower growth and less demand in China, US port delays, the Western sanctions and Russia’s tit-for-tat refusal to import from most NATO member markets, disinflation in the EU and the potential for the Greek change of government to cause further Euro instability.
This set of circumstances has disrupted normal trade flows and demand patterns.
It is reassuring to hear that New Zealand meat exporters are not having to stockpile inventory at present, but are successfully selling into a wide range of markets, albeit at a lower price than last year.
I always seem to find myself having to argue in favour of meat companies and their sales skills, especially in the face of rhetoric which states categorically the companies are either incompetent or profiteering at the expense of farmers.
This situation can apparently only be solved by consolidation of the cooperatives and farmer ownership of the value chain.
I have no doubt there must be an industry structure which could provide less volatile returns to farmers.
But as long as the meat industry is characterised by seasonal and climatic variations in livestock farmed by individuals and converted into a huge product range, the traditional trader selling to a network of retail, wholesale and food service customers will play an essential part.
Ownership structures will not make any significant difference to this.
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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he runs a boutique B&B with his wife. He is chairman of the Warkworth A&P Show Committee. You can contact him by email at allan@barberstrategic.co.nz or read his blog here ».
14 Comments
And with that, the great asset transfer from everyone to the wealthiest 0.1% will be almost complete...
Interesting article I can see problems for sheep and beef farmers going forward. I think there is a shortage of younger farmers willing to take on the big mortgages and there are alot of farms that will have to come on the market because of the large number of older farmers in the industry. I think there could be a drop in farm values here too. It will be interesting if the rich foreign investors buy the farms, and if they do what will that do to the industry? What value do alot of these farms have if they are not farmed well? New Zealanders running farms for rich foreigners will just be ripping them off. Apparently on James Cameron's farm they cut a hay paddock and let it rot on the ground ( he does'nt need the money). I think there could be a continuing drop in production if the farms are bought by the land bankers.
The NZ beef industry is going to get shafted in the US market.
http://www.progressivedairy.com/dairy-basics/ai-and-breeding/11110-dair…
Interesting article Aj, but the bit that they left out is the difficulty of getting their cows in calf in general, and the difficulty of getting a cow in calf to sexed semen. The technology is not good enough yet to worry about it. When they draft the girls from the boys they injure the semen. Its not good quality and they dont swim well. Which makes use on cows hardly worth it. Several years ago I had a conversation with a bigwig in the industry exclaiming the potential for just this scenario. The beef industry in nz would be reborn he said. Well not yet. But its in the near future i suppose.
Belle, I talked to a local AI guy, he said he's using a tonne of Lim Flex and there are calf rearing operations being set up to handle the calves pre feedlot. Some of these operations for feeding calves are huge.
I thought the figure for sexed semen was an %85 hit?
As profile sez ok on heifers. Not gd on cows. The semen dont swim 2 gd. Cows have big private bits. Ahem. But you still have the problem with AI. It is specialist stuff. Slow work. Semen gotta go straight from bank, to 38°water to warm pistolette to cow in 5 mins max. Trying to keep the water at 38 is a mission in itself. Not many techs understand the requirements. Therefore low result. Plus the higher % sex u want, the more time consuming the draft,the more expensive the semen. Then you gotta keep the calves alive. And get them to decent weaning weight. Talking to one foreign know it all, i asked what his worst loss was. 33% . Lololol and he was trying to tell me how to rear calves. Its all easy in theory Aj. In reality not so much. When you own the stock you feel the loss. Put staff in charge....Ask a corporate dairy farm what there weaning to mating percent is. They wouldnt know wouldnt care.
Last year (2013) I used year-old frozen sexed semen (year old due to a communication mix up the year we bought it and was told it wasn't available). We got a good response to it. (80+% in calf in Feb)
The last mating (2014) we used 3 per day of fresh sexed semen (Fonterra had bought up all the stocks of Fresian Frozen Sexed). Topped off the daily with frozen from Selected 10 bulls chosen for high fertility.... This years result 67% in calf.
Belle, The Atten Babler article has some interesting stuff in it.
The report showed that as of January 1st, 2015, the dairy cow herd was 1.1% above a year ago while the number of dairy replacement heifers was 1.5% higher than the 2014 figure. Total dairy cows, at 9.31 million head, were the largest January 1st figure in six years and dairy replacement heifers, at 4.62 million head, were the largest January 1st figure in three years
4.6 million replacement heifers !!!!
We are dry but it's normal for us this time of year. Must be worried farmers down south. My place grows in winter so I'm relaxed.
Over here I'm more worried that the USA is investing heavily in production and we are going to pay the price in NZ. Grape industry is a classic industry at risk as must be beef. Low interest rates are going to unblance production v demand in a big way.
We have had some rain which has helped the dams,the big one up here, is up on this time last year but no snow. No snow on the Sierra's! Well just a touch up high, so levels will drop fast in spring.
Retailers are hurting with the port strike, as are beef and dairy exports.
http://www.capitalpress.com/Nation_World/Nation/20150205/port-slowdown-…
http://hamodia.com/2014/12/28/california-port-bottleneck-hurts-retailer… The slow-down at West Coast ports is causing problems for dairy exporters as well. Dermot Carey, senior vice president of the ingredients division for Seattle-based Dairigold says they have hundreds of containers of cheese, butter and milk powders stacked-up in warehouses. Carey tells Cheese Market News the whole thing is reaching a critical point because they are running out of warehouse space.
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