Ifarm market report

Issue 813

Friday 27 April 2012

Rain welcomed by most Many regions throughout New Zealand would be thankful for the dose of rain today. The Manawatu/Wanganui region in particular was starting to get dry. Pressure is building on cattle prices at the works as the kill ramps up. Overseas returns for beef remain dire, apart from US imported beef prices which have bounced back from recent falls.

No change on the OCR As expected the Official Cash Rate was held at 2.5% yesterday.

This caused a slight lift in exchange rates, but possibly not by as much as usual, as most were expecting the no change sign to come out. While Reserve Bank Governor Alan Bollard noted the domestic economy was showing signs of recovery, the global markets were fragile and remained an area of concern.

Market Snapshot

Cattle M2 Bull P2 Steer Store R2yr Bull Store R2yr Steer

300kgCW 300kgCW 420kgLW 450kgLW

n/c -2c n/c n/c

4.10 3.98 2.25 2.20

4.10 4.00 2.25 2.20

4.10 4.03 2.30 2.30

4.45 4.45 2.00 2.15

16kgCW 32kgLW

n/c n/c

5.67 2.95

5.67 2.95

5.90 2.95

6.90 3.30

60kgCW

n/c

7.15

7.15

7.15

7.60

431

446

631

Last Week 0.813 0.507 0.619 72.59

Last Month 0.820 0.513 0.614 72.83

Last Year 0.802 0.481 0.540 68.19

Sheep Lamb M Store Male Lamb

Deer AP Stag

Wool

Rural confidence slides For the first time since August 2009, farmer confidence has dropped into negative territory. This is according to the latest Rabobank Rural Confidence Survey. Almost 1/3 of farmers believe the golden run is over and expect the agricultural economy to worsen over the next 12 months. Only 12% of respondents held this view at the last survey. Driving this pessimistic view was declining key commodity prices and a persistent high NZ$. Confidence was lowest among the sheep and beef sectors. Falling market conditions since the start of 2012 and the end of good seasonal conditions were also on farmer’s minds. Most were more optimistic about the long-term future of farming based on the global need for protein.

US discovers 4th “mad cow” case A dairy cow in California tested positive to BSE or ‘mad cow’ this week. It is the fourth positive result since “all hell broke loose” back in 2003. US beef futures immediately fell on the news. But the futures trade has since rebounded, after it was found the new case was not harmful to humans. The biggest fear of the US was how the world markets would react. When a major outbreak was detected in 2003 some countries imposed a total ban on US beef imports. This week however, U.S. authorities quickly told consumers and importers there was no danger the meat would enter the food chain. Mexico, Korea, Japan, Canada and the EU said they would continue to import U.S. beef, although two major South Korean retailers temporary halted sales. However some in the Australian beef industry jumped the gun noting the discovery would have flow on benefits for Aussie beef exports.

-15c

Coarse Xbred Indicator

Currency Currency

Chge +0.0% -0.7% -0.4% -0.3%

NZD:USD NZD:GBP NZD:EURO TWI

Weather Northland Waikato King Country Bay Of Plenty Gisb./Wairoa Taranaki Mana./Wang.

Hawke's Bay Wairarapa

This Week 0.814 0.503 0.616 72.38

Rainfall (mm) This Week 2 0 0 0 0 0 0 0 0

Last 4wks 51 25 38 43 126 33 2 68 24

Soil Temp (°C) This Week 14.8 13.3 11.3 12.5 9.7 11.9 12.0 10.6 10.3

vs Ave V.Low V.Low V.Low V.Low Ave V.Low V.Low Ave V.Low

Last 4wks 16.0 15.4 13.7 14.8 11.5 13.5 13.6 13.2 12.7

Trend Down Down Down Down Down Down Down Down Down

Rainfall and soil temp calculated over 7 days to Thur – provided by NIWA

North Island 16kg Lamb ($/kgCW)

North Island 300kg M2 Bull ($/kg) 5.0

8.0

4.5

7.0

4.0

6.0 5.0

3.5 5yr Ave 3.0 11 Feb

Next This Last Last Chge Week Week Month Year

$/kg

11 Mar

11 Apr

Last Year 11 May

11 Jun

This Year 11 Jul

For subscriptions & information please contact us: PO Box 864, Napier, NZ ph 0508 873 283 fax 06 650 4550 info@ifarm.co.nz www.ifarm.co.nz

Editor: Michaela Trotter Co-editor: Mel Croad Directors: Jon Sherlock & Peter Fraser

4.0 11 Feb

5yr Ave 11 Mar

11 Apr

Last Year

11 May

11 Jun

This Year 11 Jul

In This Issue Pressure building on cattle prices Weaners still sell strong Export lamb $5.67/kg Store lamb prices a tad higher

pg pg pg pg

2 2 3 3

Cattle Markets Pressure building on cattle prices 300kg cwt bull was steady on $4.10/kg this week while 300kg cwt steer was $4.00/kg. Space has been tight at processing plants, partly due to it being a short week. There are more cows being slaughtered although they are not rushing out. Backlogs are forming for all other classes of stock as meat processors focus on killing cows. Prime prices continue to face downward pressure; overseas prices for cuts are weak, but also trimmings 85CL (15% fat) and fatter have dropped in value recently. Not only that, but there are still a lot of cattle to be killed this season. The NI cattle kill for 2011/12 stands at 1.2m as of last week. With an est. 2.318m to be killed, NZ is only half way through its kill when usually it’s 61% through.

Weaners still sell strong The store cattle market has been flat. Market participants are uneasy about the NZ dollar, especially after ANZ economists announcing it could hit US90c next year. Farmers continue to pour the weight into cattle because of excellent feed levels, rather than selling them store. This is further restricting the supply of store cattle. Winter contracts are filtering out and will likely have a positive affect on demand for store cattle.

At the Feilding weaner fair, buyers were drawn towards cattle 200-240kg. Traditional weaner steers 190-230kg made $3.12/kg on average while heifers were on $2.71/kg. Bits and pieces were yarded at Stortford this week. The R2yr 350kg heifer indicator currently sits at $2.22/kg which is on the rise and slightly ahead of the same time last year. The Feilding cattle sale was flat today. Traditional R2yr steers 425-475kg were $2.34/kg on ave. R2yr steers lighter than that were $2.45/kg on ave.

Cows still failing to “run” The North Island cow kill has still yet to find its feet.

Returning to a full kill week last week, the kill increased slightly from the shorter Easter weeks but is still struggling to match levels seen at this time of the year. Just over 21,000 cows were slaughtered last week, down on the usual 27,000/wk for this time of the season. Season to date the NI cow kill is down by over 100,000 head on last season and nearly 70,000 head down on 5yr ave levels. Given the money for M cow is 45c/kg off last years prices, it seems most are happy to milk what they have and wait for prices to lift.

US imported bull bounces back There has been a lot of uncertainty in the US imported beef market in recent weeks, because of the Lean Finely Textured Beef crisis. This has had an impact on US grinding beef demand generally. However as the weeks pass this crisis does appear to be subsiding. This week, the shortage of US imported beef seems to have got the better of US importers.

US imported bull prices have recovered somewhat and now average US$2.20/lb. Imported cow prices are still cheap at US$2.01/lb when compared to the strength of US domestic cow prices, which now average US$2.28/lb.

Grinding beef demand will continue to grow 50-56% of all the beef eaten in the US was in ground beef form last year. US veteran economist and agribusiness consultant Bill Helming forecasts that will lift to 65% by or before 2030 as the percentage of beef consumed in whole muscle form declines. Americans are purchasing more lowerpriced ground beef and less of the much more expensive middle meats. Processors are producing more ground beef to satisfy the growing needs of budget-conscious consumers and families and this trend is unlikely to change. With imports currently making up 15% of the ground beef market in the US, any long term increase in demand is good news for NZ beef exports to the US.

27 April 2012

Slaughter Cattle Prices $/kg M2 Bull P2 Steer P2 Cow M Cow Local Trade

300kg 300kg 230kg 200kg 230kg

Next This Last Month Range Chge Week Week n/c 4.10 4.10 4.00 - 4.10 4.10 -2c 3.98 4.00 3.90 - 4.10 4.03 n/c 3.15 3.15 3.00 - 3.25 3.20 -2c 3.03 3.05 3.00 - 3.10 3.10 n/c 4.05 4.05 4.00 - 4.05 4.05

Last Year 4.45 4.45 3.65 3.50 4.40

Store Cattle Prices $/kg Wnr Bull Wnr Steer Wnr Heifer R2yr Bull R2yr Steer R2yr Heifer

260kg 200kg 260kg 200kg 220kg 180kg 420kg 380kg 450kg 400kg 380kg 330kg

Next This Last Range Month Chge Week Week n/c 2.90 2.90 2.60 - 3.00 2.80 n/c 3.00 3.00 2.80 - 3.00 2.90 n/c 2.90 2.90 2.60 - 3.00 2.80 n/c 3.00 3.00 2.70 - 3.20 2.90 n/c 2.60 2.60 2.50 - 2.70 2.60 n/c 2.70 2.70 2.65 - 2.90 2.75 n/c 2.25 2.25 2.20 - 2.30 2.30 n/c 2.30 2.30 2.25 - 2.35 2.35 n/c 2.20 2.20 2.15 - 2.25 2.30 n/c 2.30 2.30 2.15 - 2.40 2.40 n/c 2.10 2.10 2.00 - 2.15 2.15 n/c 2.15 2.15 2.00 - 2.20 2.25

Last Year 2.15 2.35 2.50 2.60 2.20 2.30 2.00 2.10 2.15 2.20 2.05 2.10

N.B: Slaughter values are gross operating prices available in the NI including premiums.

Store values are ave gross on-farm prices available on a line.

Cattle Slaughter Trends Estimated Weekly Kill: Last 2Wks Last 1000s Week Ago Year Cattle NI 42.5 37.7 44.2 Cattle SI 19.4 15.6 17.6 Cattle NZ 61.9 53.3 61.8 Bull NI 6.8 5.8 5.6 Bull SI 1.8 1.4 1.8 Str & Hfr NI 14.6 12.9 13.7 Str & Hfr SI 5.2 5.5 5.8 Cows NI 21.1 19.0 24.8 Cows SI 12.4 8.7 9.9

5yr Ave 49.5 18.2 67.7 7.2 2.1 15.4 7.0 26.9 9.1

Last week compared to: 2Wks Last 5yr Ago Year Ave +13% -4% -14% +24% +10% +6% +16% +0% -9% +17% +21% -6% +29% -2% -14% +13% +6% -5% -5% -11% -26% +11% -15% -21% +43% +25% +36%

Beef Export Demand & Procurement Indicators Export Market Indicator Price This Last Chge Week Week US 90CL $/lb +1 2.01 2.00

Last Year 1.97

This Wk 4Wks Ago -2%

compared to: Last 5yr Year Ave +2% +32%

US Dom Cow

+3

2.28

2.25

2.02

+4%

+13%

US 95CL $/lb

+5

2.20

2.15

2.07

-0%

+6%

+36%

+13

5.96

5.83

5.69

+0%

+5%

+21%

+13

1.86

1.73

1.24

+2

+62

+39

-9%

-1%

NZ$/kg Margin CIF-FOP

+41%

Procurement Indicator - Schedule as % of US 95CL price % Returned

-2%

68.8% 70.3% 78.2%

-0%

In Focus 95CL Bull (US$/lb)

2.30

5yr Ave This Year Last Year

2.10 1.90 1.70 1.50 11 Feb

11 Mar

11 Apr

11 May

11 Jun

11 Jul

Sheep and Deer Markets Export lamb $5.67/kg Lamb export prices came back further this week to average $5.67/kg (gross incl wool/pelt presentation etc). Prices are well below last year’s levels of $6.90/kg but are still 11% higher than the five year average. Plants have been ticking along with steady supply, however there are reports that killable lambs are being snatched up by the store market.

Store lamb prices a tad higher Store lamb prices may have edged a tad higher this week.

There is increased optimism in the market after meat companies beginning to announce winter contracts.

Contracts are around $6.20-6.50/kg dependent on company and what time of year the contract is for. Paddock prices tend to be chasing auction prices. Lambs in the HB are close to $3.00/kg for a 30-32kg lamb, dropping to $2.90/kg for anything heavier. Good lambs in Taumaranui are generally selling between $90/hd and $100/hd, for example 32kg lambs are $3.00/kg on ave. In Taihape, the market is steady and there are few lambs coming out. Lambs 30kg and lighter are still fetching $3.00/kg while lambs in the mid 30s are $2.80-2.90/kg. 30kg lambs in Wanganui tend to be $2.802.90/kg. Store lamb prices seem to be lagging in the Waikato and Bop, by being around $2.80/kg. Lamb numbers continue to be tight, especially seeing many farmers are now choosing to finish themselves because of excellent feed levels. Small lambs are hard to find because of the great season, with the majority of the lambs already 30kg plus.

Lamb auctions remain firm Most lambs sold between $90/hd and $110/hd at Stortford on Wednesday with 32-34kg male lambs firm on $3.09/kg.

The weights keep climbing at Matawhero, with the majority of lambs 30-36kg today. Prices held with 32-34kg male lambs fetching $2.96/kg on ave. Prices were steady to firm at Feilding. Male lambs 32-34kg were $3.06/kg on ave.

UK reporting favourable Easter lamb sales EBLEX has reported good demand for lamb over Easter throughout Europe. This buoyed sales and prices. The uplift in prices as a result of the Easter market is an expected seasonal trend. Its hard to gauge a direct comparison with Easter last year given Easter fell earlier this year. But it seems prices were softer in a number of markets compared to where they were by late April last year (when Easter fell).

EBLEX also report that the increased availability of lamb principally from NZ this season should prevent prices from reaching the unprecedented levels that were recorded late last year. Alliance chief exec Grant Cuff noted this week that feedback on international sales of fresh NZ lamb at Easter was positive while frozen cuts were struggling. Despite there being some positivity, prices offered to our main markets have generally been lower than last Easter. Factoring this with a higher exchange rate continues to weigh heavily on returns to farmers.

No North Island wool sale this week

54% 52% 50% 48% 46% 44% 42% 40% Feb

32kgLW store lamb as a % of 16kgCW lamb 5yr Ave This Year Last Year

27 April 2012

Slaughter Sheep Prices Next This Last Week Week Month Range 5.67 5.67 5.50 - 5.80 5.90 5.67 5.67 5.50 - 5.80 5.90 5.67 5.67 5.50 - 5.80 5.90 3.20 3.20 2.90 - 3.30 3.20 0.00 0.00 0.00 - 0.00 0.00

Last Year 6.90 6.90 6.90 4.50 4.50

Next This Last Lambs - $/kg Month Range Chge Week Week Sheep - $/hd Male Lamb 32kg n/c 2.95 2.95 2.80 - 3.00 2.95 28kg n/c 3.00 3.00 2.90 - 3.20 3.05 25kg n/c 3.20 3.20 3.15 - 3.40 3.20 Ewe Lamb 30kg n/c 3.00 3.00 2.90 - 3.20 3.10 190 130 - 250 2th Ewe $/hd n/c 190 190 170 130 - 190 MA Ewe $/hd n/c 170 170 130 125 - 160 5yr Ewe $/hd n/c 130 130

Last Year 3.30 3.35 3.40 3.30 150 120 110

$/kg Lamb M Lamb X Lamb H Mutton MX But. Ewe

16 19 22 20 24

kg kg kg kg kg

Chge n/c n/c n/c n/c n/c

Store Sheep Prices

N.B: Slaughter values are gross operating prices available in the NI including premiums.

Store values are ave gross on-farm prices available on a line

Sheep Slaughter Trends 1000s Lamb NI Lamb SI Lamb NZ Mutton NI Mutton SI

Estimated Weekly Kill: Last 2Wks Last Week Ago Year 244 200 189 397 317 308 641 517 497 19 14 13 26 22 20

5yr Ave 250 413 663 36 39

Last week 2Wks Ago +22% +25% +24% +39% +16%

compared to: Last 5yr Ave Year +29% -2% +29% -4% +29% -3% +55% -46% +30% -34%

Lamb Export Demand & Procurement Indicators Export Market Indicator Price This Wk compared to: This Last Last 4Wks Last Chge 5yr Ave Week Week Year Ago Year -7 US F/Rack $/lb 12.08 12.15 11.70 -1% +3% n/a UK Leg -1 p/lb 1.70 1.71 2.54 -3% -33% +2% NZ$/kg +1 7.45 7.44 11.64 -1% -36% -15% Procurement Indicator - Lamb schedule as % of UK Leg price -1% 76.1% 76.9% 59.3% % Returned -1% +17% +21%

Venison Price $/kg AP Stag

Next This Last Range Month Chge Week Week 60kg n/c 7.15 7.15 7.00 - 7.20 7.15

Deer kill slow Venison prices for 60kg AP stag remain bottomed out on $7.15/kg. Usually, prices begin to seasonally climb around March. Last year, it was mid March. Deer numbers to kill are lacking which has meant some plants are closed next week.

Many farmers are busy trading weaners.

350k

North Island Weekly Lamb Kill

300k 250k 200k 150k 100k 50k

Mar

Apr

May

Jun

Jul

Last Year 7.60

k 04 Feb

5yr Ave Last Year This Year 04 Mar

04 Apr

04 May

04 Jun

04 Jul