Sheep and beef farmers to feel the brunt of COVID uncertainty with exports set to decline

  • 21/10/2020
Uncertainty in the export market is set to be reflected in farm-gate prices.
Uncertainty in the export market is set to be reflected in farm-gate prices. Photo credit: Getty

Sheep and beef farmers are set to feel the brunt of the COVID-19 pandemic in the 2020/21 season, with meat exports forecast to drop sharply.

The average farm profit before tax for sheep and beef farms across the country is predicted to fall 26 percent to an average $115,100, Beef + Lamb New Zealand (B+LNZ) said in its latest new season outlook report.

The dire prediction comes as uncertainty in the export market due to coronavirus is set to be reflected in farm-gate prices.

"This outlook sets the scene for a challenging year," said Andrew Burtt, B+LNZ's chief economist.

"Farmers will tightly control expenditure and focus on what can be optimised behind the farm gate to make the most of the season and be best placed for the next."

The report forecast lamb export earnings to decline almost 15 percent and sheepmeat co-products to fall by around 8 percent compared to the 2019/20 season.

Beef and veal export revenue is forecast to decline by 9 percent on last season.

"Much of the predicted profit decline is a result of COVID-19, the drought of 2020 impacting production and increasing competitiveness in key beef export markets," said Burtt.

The report noted: "steep declines are being recorded in all major economies, excluding China, unemployment is soaring, consumer spending has slumped and the purchasing power of New Zealand markets has been restricted".

But despite the global uncertainty, said Burtt, there was "solid underlying market fundamentals that will continue to support demand from New Zealand sheepmeat and beef exports".

"Average export values are expected to be supported by the positive market fundamentals, and are forecast at similar levels, or slightly above, five-year averages.

"China's demand for meat protein continues to be fuelled by pork shortages that have resulted from African Swine Fever, and there is growing demand for high quality, nutritionally rich proteins. A shifting consumer preference towards food safety will also support demand for New Zealand sheepmeat and beef."

Jeremy Baker, L+BNZ's chief insights officer, said the global uncertainty reinforced the need for stable and predictable domestic regulation to avoid putting further pressure on the red meat sector.

"Despite the challenges, red meat exports are predicted to be greater than $9 billion and will represent more than 17 percent of New Zealand’s total export receipts," he said.

The report also noted the impact of uncertainty relating to trade relations, such as between the US and China, and Brexit negotiations.