24 Dec 2012

Grain growers hoping for benefits from lift in milk prices

2:09 pm on 24 December 2012

Grain growers are hoping a lift in milk prices might bring some benefits for them as well, in the form of increased demand for feed grain.

Drought in the United States and also in the Black Sea region left the global market with a shortage that cause a spike prices mid year.

Agrifax analyst Ivan Luketina said a bumper harvest last season and low demand from the dairy sector left a lot of grain stored in storage. The domestic grain market was very quiet toward the end of this year.

Now Fonterra has raised its payout forecast and the country is starting to dry off, particularly in the North Island.

Grain growers will be hoping that this increases demand so space can be cleared in silos, and prices can lift.

At the moment feed grain prices on the sport market are 18% -20% lower than this time last year.

But Mr Luketina said there's no improvement in sight for wool prices, at least for carpet wool in 2013.

Wool markets

The European debt crisis took a heavy toll on many commodities and wool was not immune. The Agrifax wool price indicator is now 26% lower than this time a year ago.

Fine micron wools held up best against the fall, as they are made into cloth in China.

China's demand for wool grew in 2012 and this season has seen record exports of wool to China since July.

However, 35 - 39 micron wools are back around 37% in price compared with last year.

New Zealand starts producing much larger volumes of these higher micron wools at this time of year and their prices have started to come back.

Mr Luketina said this downward slide looks set to continue until carpet wool markets start to pick up.

High manufacturing beef prices in the United States, where record levels were reached in March and then surpassed in December. But the weak US dollar has continued to encourage its exporters.

The availability of US beef is particularly prevalent in Japan and South Korea, where it has proven very competitive.

When combined with a slowdown in demand in these nations, it has been tough going for New Zealand and Australian beef exporters to those markets.

Mr Luketina said Agrifax is confident that prices will rise to new heights, it's just a matter of when.

Lamb markets

2012 was a year of price corrections in lamb markets.

it wasn't until the latter half of the year that the full extent of a drop in overseas prices started flowing through to farmgate prices.

The net result is that 2012 ended with farmagate lamb values around 35% lower than a year ago.

Mutton values also took a similar tumble, with farmgate prices down around 40% compared to 12 months ago.