TL;DR: Farmgate dairy and beef prices rise, lamb remains low. Dairy outlook improves, but challenges persist. Economic growth could support agricultural prices, amidst geopolitical risks.
Farmgate prices for dairy and beef are on the rise, while lamb remains lower, as noted in BNZ’s Rural Wrap.
Doug Steel, a BNZ economist, mentioned seeing positive shifts in some agricultural prices. “There’s a bit of good news on the price front,” he stated.
However, these price changes haven’t appeared in official stats yet due to reporting delays.
Dairy prices, in particular, showed significant improvement in recent Global Dairy Trade auctions, potentially supporting a milk price near Fonterra’s forecast of $7.80/kgMS for the 2023-24 season.
This forecast, though lower than last year’s $8.22, remains optimistic compared to mid-season predictions.
Including dividends, the season’s earnings might exceed Dairy NZ’s breakeven estimate of $7.75/kgMS.
Beef has also seen price increases abroad, positively affecting local farmgate prices.
Yet, not all product prices have strengthened. “Lamb prices, in contrast, remain low, facing international supply and demand challenges,” Steel noted. Current farmgate lamb prices are roughly 15% below the five-year average, impacting profitability.
Beef + Lamb New Zealand’s update projected a significant decrease in farm profits due to low lamb prices and rising costs.
For fruits like kiwifruits and apples, prices might drop slightly this year, following a recovery from last year’s weather damages. Zespri anticipates lower per-tray pricing but higher Orchard Gate Returns.
Global economic growth revisions could support some agricultural price improvements, but caution remains due to below-average growth expectations.
“We expect moderate price gains for NZ’s primary products, but we’re talking about higher prices, not high prices,” Steel clarified, citing last year’s low base for annual comparisons.
He also warned of potential risks, including geopolitical issues, that could abruptly affect prices.
