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USDA GAIN: Livestock and Products


13 September 2012

USDA GAIN: New Zealand Livestock and Products Annual 2012USDA GAIN: New Zealand Livestock and Products Annual 2012

New Zealand cattle slaughter numbers are projected to remain relatively stable into 2013, and are forecast at 4.1 million head. Supported by favorable weather and pasture conditions, beef production in 2013 is forecast at 633,000 metric tons, up marginally from the revised 2012 estimate of 627,000 tons. Bucking the longer term trend, beef exports to the United States are projected to increase and are forecast at 252,000 metric tons, up five percent from the revised estimate of 240,000 tons exported in 2012.

USDA GAIN: Livestock and Products

Production

Cattle Production & Slaughter

Total cattle slaughter in 2013 is forecast at 4.146 million head. This is marginally (1 percent) higher than the revised 2012 estimate of 4.120 million head.

PSD Table: Cattle Numbers

Not Official USDA Data Data included in this report is not official USDA data. Official USDA data is available at http://www.fas.usda.gov/psdonlineonline

Despite apparently stable slaughter numbers, there are some significant changes affecting overall beef production. The cow kill for the first half of 2012 was reported at 65,000 head less than the previous year’s first half kill, and more than 100,000 head shy of many industry forecasts.

Following excellent weather and pasture growth during the 2011/12 spring, summer and autumn periods, cows were fed very well and the dairy herd had more cows’ in-calf than expected (by approximately 100,000 head). Typically dairy farmers kill their empty (non-pregnant) cows at the end of the milking season (April/May). The extra cow in-calf have been retained by dairy farmers and will be milked for all or part of the 2012/13 season. It is expected that they will begin entering back into the market late in the fourth quarter of 2012 and most will be disposed of in the first half of 2013 as feed conditions change and it becomes too expensive to carry on feeding extra cows. The disposal of held over cows from 2012 should give rise to a significantly increased cow kill in 2013 forecast at 925,000 (an increase of 125,000 head).

The extra cows carried through 2012 will also have an effect on the number of bobby calves coming forward for slaughter. In 2013 it is forecast that at 1.75 million head, the total calf kill will be 80,000 head less than in 2012 in the wake of the expected surge in numbers of calves being born in 2012. The increased calf crop in 2012 will be the result of the extra cows and likely better survival rates at calving, which are not expected to be repeated in 2013.

Adult steer, heifer and bull slaughter for 2013 is forecast at 1.47 million head and is based on the survey work carried out by Beef and Lamb New Zealand (a levy funded industry body). This will be 19,000 head less than the 2012 estimate. Now estimated at 1.49 million head, the 2012 adult steer, heifer and bull kill is 57,000 head less than previous estimates. This is due in part to increased live exports; partly due to some cattle being held over to the next year; and to a more accurate survey of stock on hand that will be available for slaughter over Quarter two of 2012.

Cattle Inventory Trends

At the start of 2013, the total cattle herd stood at 10.3 million head, up about 2% or close to 200,000 head more than at the start of 2012. This is almost entirely due to the increase in dairy cow numbers. Since 2003, the size of NZ’s dairy herd has trended upward at an average rate of about 116,000 head per year. The increase in 2012 is estimated at 205,000 head. Beef and Lamb NZ estimates that as of June 30, 2012, 13% of all cattle on sheep and beef farms were either dairy cows or heifer replacements for the dairy herd.

Beef Production

Total beef production for 2013 is forecast at 633,000 MT (CWE). A likely return to more normal pasture growing conditions with mild to moderate El Nino weather patterns expected in 2012/13, should see average carcass weights decline closer to the five-year average. Good cattle liveweights observed in the third quarter of 2012 as a result of better feeding earlier in the year should carry over to higher slaughter weights during the first half of 2013.

The 2012 total beef production is estimated at 627,000 MT, about four percent lower than Post’s previous estimate. The decline is attributed to the reduction in slaughter numbers. The decline in slaughter numbers is likely to be mitigated to some extent by the significantly higher average carcass weights during the first half of 2012.

Source: StatsNZ, B&LNZ, Post estimates

Over time an increasing amount of New Zealand’s beef production is being sourced from the dairy herd. Dairy cattle comprise 62% of the total cattle herd now; where as a decade ago they comprised 52%. Over 80% of the cow kill comes from the dairy herd, the calf kill and nearly all the bull kill is sourced from progeny of the dairy herd. In addition, cattle bred from beef bulls servicing dairy cows later in the mating period each spring, provide significant progeny for replacements to the national heifer and steer herds. This trend is set to continue. Manufacturing beef will comprise an ever increasing proportion of the total beef produced in NZ. The small amount of high value prime cuts from heifers, and steers will either be consumed locally or exported to the very high-priced markets such as Europe.

Farm Gate Beef Prices

NZ FOB & Farm Gate Prices for Bull Beef Exports to US

In nominal terms profitability of the beef and lamb sector hit a record level in the 2011/12 year, mostly on the back of the highest prices ever received for lamb meat. Higher farmgate beef prices and very favorable weather conditions also helped propel farm businesses to the record profits.

Consumption

Domestic consumption in 2013 is forecast at 115,000 MT CWE, virtually the same as in 2012. Domestic consumption is very stable fluctuating within a fairly narrow range of 110,000 MT CWE to 120,000 MT CWE per annum.

Statistics New Zealand estimates that for the general food basket, prices fell in the year to June 2012 by an average of 0.2%. Meat prices (meat, poultry and fish) rose by 2.2% helped along mainly by fresh chicken prices which went up by 11%. Within this category, beef and veal prices rose by a mere 0.2%. Looking forward, no significant price changes are expected in the NZ beef sector.

Of some interest in the red meat sector is the introduction by McDonalds in New Zealand of Lamb Burgers onto its menu. Way back in the late 1980’s lamb burgers were suggested by the then Member of Parliament, Mike Moore now NZ Ambassador to the US, as a way to market the oversupply of lamb that existed at the time. It is hoped that if this innovation is successful lamb will find its way onto McDonalds menus elsewhere in the world.

Trade

Exports

Beef exports in 2013 are forecast at 529,000 MT CWE, up two percent on the revised 2012 export estimate of 521,000 MT.

Discussion

Trade with Western Pacific Rim countries has been described as being considerably more difficult to effect at satisfactory prices over the last six months than was the case in 2011. There have been notable exceptions such as the Philippines, Japan, and Hong Kong as can be seen in the trade table above.

One of the big impediments that beef exporters have faced over the last three years is appreciation of the NZ dollar. The pricing chart below reveals that on the basis of U.S. dollars, beef prices received by NZ exporters are trending upwards. However, the subsequent two charts reflect the appreciation of the NZ dollar against the U.S. dollar, and the result of that appreciation on beef prices once the receipts are repatriated into NZ Dollars. The general shape of the price lines in the third chart is flat over time with no trend readily discernable. Of course exceptions can be found: one is shown in the chart for farm gate prices for bull beef reported earlier in this report which shows a definite upward trend for both USD pricing and in NZD pricing at the farm gate. However the chart following that price analysis shows the ratio of farm gate prices to FOB prices. Generally over the last three years this level has been above trend, which suggests the meat processors have been reducing their margins (and ultimately profits) to increase farm gate pricing.

US

Beef exports to the United States in 2013 are forecast at 252,000 MT (CWE), an increase of 5 percent on the revised 2012 estimate of 240,000 MT.

The beef export statistics tables above show that for the first half of 2012 the tonnage shipped to the U.S. was up by 7,000 MT PWE or approximately 7% over the same period in 2011. For the first half of 2012 the U.S. took 49.5% of the total amount of beef shipped from NZ versus 46% for the same period in 2011. This is against the trend over the last decade which has seen the tonnage shipped to the US drift downwards both absolutely and as a relative proportion of total exports. This has occurred as a result of two factors:

  • The volume of bull meat (which is nearly all exported to the US) being produced has reduced as the relative profitability for bull farming enterprises has waned.
  • As other destinations such as SE Asia have become more affluent they have become prepared to pay as much or more than US customers for specific cuts so product has been diverted away from the US.

The trend for other destinations to pay more for some specific cuts from cow or bull carcasses has been reversed over the last six months. Signs of this reversal can possibly be detected from the table above showing the first six months of data for the last 3 years where the value of shipments to the U.S. has risen more than the tonnage. This is in contrast to most other destinations detailed in the table. Industry sources expect to send a greater proportion of beef to the US over the next 12 months.

Trade Diversification

The trend for exporters to diversify away from the U.S. market and progressively away from the next five highest volume markets has certainly been in evidence over the last 5 years. This has been based on emerging economies generating enough wealth to allow a growing proportion of people to afford imported beef at prices which have rivaled or surpassed what has been on offer in the U.S. or the other handful of long standing markets. However it is thought over the next 12 months this trend is likely to see a leveling off period.

Malaysia

The time consuming process to get slaughter houses certified by Malaysian authorities specifically for their Halal suitability has progressed over the last year with eight NZ premises now approved to slaughter beef that can be exported to Malaysia. This is up from two plants in 2010. The trade data show a corresponding jump in exports for the first half of 2012 over the same period in 2011. However anecdotally this market is not seen as attractive as it once was because prices for the lower value cuts sent there are presently not as good relative to other potential destinations. Some of this could be attributed to the lower-priced Indian “carra-beef” (of buffalo origin) which is said to be arriving in Malaysia in greater quantities.

China

Industry commentators are saying that while the China-NZ FTA is working well for some industry sectors (dairy especially) it hasn’t made any real difference in access for beef. This is in contrast to sheep meat which enjoys reportedly satisfactory access. Lamb exports to China have boomed in 2012. According to the Ministry for Primary Industry (MPI) as of August 2, 2012 there were six NZ beef processing plants approved for export to China, and a further 16 sheep and beef processing sites. Part of the frustration expressed by the beef industry is the insistence by Chinese authorities on approving each site/plant individually, where as the NZ industry maintains that under the FTA, MPI would negotiate a blanket approval for the whole country with the Chinese Government. Some of the problems with approvals have been to do with the physical layout of the plants.

Indonesia

The volume being shipped to Indonesia is still in free-fall, down 25% in the first six months of 2012 compared to the same period in 2011. This comes on the back of a 44% reduction in 2011 exports compared to 2010. This reduction is basically because not enough import licenses are available at a level to optimize trade volumes. The level of import licenses granted is partly related to the stated objective of the Government of Indonesia to become self-sufficient in meat production. Imports are being restricted in order to stimulate domestic beef production.

South Korea

NZ-South Korea FTA negotiations have reportedly stalled. This is seen as a serious setback by the NZ beef trade, as tariff rates are around 40% and now with the U.S./Korea FTA in effect, beef entering from the U.S. will enjoy a strong tariff advantage. This combined with the competitive U.S. exchange rate makes US beef very competitive on a price basis. Exporters from NZ say that generally Korean consumers prefer grain fed beef. Exports to Korea in the first six months of 2012 are 28% lower than for the same period in 2011. Exporters are focusing on supplying the niche of customers who choose grass fed beef and prefer its different eating qualities.

National Animal Identification and Tracing Scheme (NAIT)

NAIT finally became mandatory for all cattle on July 1, 2012. Now all cattle must be tagged with approved RFID tags and all cattle transfers between farms, to sale yards or to slaughter must be accounted for to the central NAIT database. NAIT is administered by an agency which is part of MPI. NAIT will also incorporate the cattle tagging and transfer administration of the Animal Health Board whose mission is to eradicate bovine tuberculosis from New Zealand.

September 2012

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