31 Aug 2015

Low Kiwi means high meat prices - consultant

2:01 pm on 31 August 2015

The depreciation in the New Zealand dollar should result in stronger prices for sheep and beef farmers this year, according to an agricultural consultant with AgFirst, Phil Journeaux.

Mr Journeaux said based on the beef and lamb outlook with an exchange rate of 65 cents to the US dollar, lamb returns should be around $120 to $130 and the beef schedule is around $5.50 to $6 a kilo.

He said indications were that the dairy industry would climb out of the current trough, but the future prospects for sheep and beef remained to be seen.

Mr Journeaux said simple economics was why so many sheep and beef farms had converted to dairying.

He said in the past ten years, dairy farmers, on average, have made $2,100 farm profit a hectare before tax, compared with sheep and beef farmers who have made just $100 a hectare.

"So, if you like, there's $2,000 a hectare difference, on average, over that ten year period. And that's been a prime motivation as to why we've seen so many dairy conversions," he said.

Mr Journeaux said this year looked like it could be a good year for sheep and beef farmers, given the depreciation of the New Zealand dollar which would boost lamb and wool, and the strength of the beef market.

But he said how sheep and beef prices would go in future remained to be seen.

"Internationally, prices for lamb are very static so the gain we are getting this year is very much the depreciation of our dollar.

"Beef looks good because of a drop in production in the U.S., but that will probably work itself out over the next 18 months to two years. And then we are just back to getting by.

"There's a lot of discussion about the need to revamp the meat industry. Unless something does happen, we will just keep on muddling along," he said.

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