Meat & Livestock News

Navigating Agricultural Challenges: El Niño’s Impact and Market Dynamics

Weather Patterns and Farming Conditions

The El Niño weather phenomenon is bringing mixed conditions for New Zealand farmers. In the North Island, ample grass and sufficient rainfall are supporting pasture growth, though the East Coast is experiencing drier conditions. In the South Island, areas like Marlborough, Canterbury, Central Otago, and parts of Southland are drying out. These conditions vary locally, influenced by soil moisture levels.

Livestock Processing and Farmer Advice

Currently, many regions are enjoying good feed conditions, leading to a slower pace in lamb processing as farmers focus on increasing animal weight. Beef processing capacity is also under no significant strain. However, farmers are advised to maintain communication with livestock representatives and prepare for potential processing capacity challenges if extreme dry conditions persist.

Market Prices and Economic Impact

Lamb and mutton prices are facing a downturn, largely due to Australia’s excess supply and China’s economic struggles. With China being a key market for New Zealand’s lamb and mutton exports, these conditions significantly affect prices.

Presently, lamb prices are about 19% lower than last year and 20% below the five-year average. Mutton prices have dropped approximately 37% from last year and are 50% below the average. In contrast, beef prices are relatively stable, only 5% lower than last year and 1% above the five-year average, thanks to diverse market demand and increased U.S. interest.

Farm Profitability and Future Outlook

Rising on-farm costs and inflation are putting substantial pressure on farm profitability and rural communities. The farm inflation rate was 16.3% in the year to March 2023, following a 10% increase the previous year. Beef + Lamb New Zealand (B+LNZ) anticipates a continued high inflation rate, though slightly reduced. Initially, B+LNZ predicted this production season to be the least profitable in 15 years, with a 63% drop in profit over two years.

However, lamb and mutton prices have been lower than expected, leading to further profitability concerns. The recovery of prices is uncertain, and dependent on the Chinese economy and the duration of Australia’s drought.

Despite these challenges, the sector remains resilient, with many farmers experienced in managing downturns. The global long-term outlook for red meat remains positive. Farmers are advised to manage costs carefully and avoid unnecessary expenditures in the short term. B+LNZ urges farmers to support each other and stay connected with banks and rural professionals. Resources for managing dry conditions are available on B+LNZ’s Knowledge Hub.