According to Rabobank’s December monthly update, the agricultural sector can anticipate a generally stable outlook for farm input prices going into 2024, offering a positive note as the year draws to a close.
In the dairy sector, the report highlights a robust trend in commodity prices. FOB (Free on Board) powder prices have seen a significant rally, increasing by more than 10% over the month. This surge is attributed to less favourable milk production signals emerging from New Zealand. Additionally, butter prices have also shown an upward trend in the past month.
The beef industry presents a mixed picture. In the North Island, bull prices are expected to conclude the year around the five-year average. Weekly slaughter numbers from the New Zealand Meat Board indicate a general 1% increase year-to-date.
The report notes a 7% year-on-year drop in beef export volume for September, with export values falling 15% to NZ$7.78/kg. While export volumes to China decreased by 28%, those to the US increased by 33%, reflecting a strong US market contrasted with a weaker Chinese market.
For the lamb sector, the first five weeks of the new season saw a 3% increase in production compared to the 2022/23 season. Sheep meat export volumes in September rose by 1.5%. Despite a 3% decline in volumes to China, US volumes increased by 16% and UK volumes by 35%, indicating strength in these markets amidst a generally weak trade environment.
The report also notes that Australian lamb prices remain at some of their lowest levels since 2015, with no indication of a significant recovery in the near future. New Zealand lamb prices have dropped to their lowest level for this time of year since 2016, influenced by high volumes of Australian produce and weak demand in key markets.
Rabobank maintains its forecast that the Official Cash Rate (OCR) will peak at 5.5%. The report also observes that the upward forecast and expectations of rate cuts in the US have led to a 3-cent increase in the New Zealand dollar against the US dollar. This currency shift, combined with major exporting nations grappling with deflation, is expected to contribute to lower prices for imported goods.
This comprehensive update from Rabobank provides valuable insights into the current trends and future expectations in the agricultural sector, offering a mixed yet hopeful outlook for the coming year.
