Situation and outlook for New Zealand agriculture and forestry (August 2007)
13 Beef
Prices for New Zealand beef in international markets are at record high levels, which are reflected in farm-gate prices.
New Zealand beef has been very competitive in our biggest export market, the United States (US) (see Figure 13.1).
Figure 13.1: Beef export destinations, by value, year ended 31 March 2007
Source Statistics New Zealand.
Most exported New Zealand beef, including that exported to the US, is used in manufactured beef products (see Figure 13.2). Since US beef producers began rebuilding their herds in 2004, the number of beef cows slaughtered in the US has declined, providing a gap in the market for New Zealand.
In 2006, US domestic beef prices were high due to increased feed costs caused by drought in the corn-producing areas and expanding ethanol production.
Prices for New Zealand beef in the US are expected to remain strong over the forecast period. In coming years, US beef producers are expected to reduce production and pass more of the increased feed costs on to consumers.
Figure 13.2: Beef export volumes, by type, year ended 31 March 2007
Source Meat and Wool New Zealand.
The continuing strong prices for New Zealand beef in the US will be tempered by lower prices for New Zealand prime beef in North Asia.
Overall, international prices for New Zealand beef are expected to fall gradually over the forecast period. Farm-gate beef prices are expected to fall in the year ending 30 June 2008, with prime beef prices falling more than manufacturing beef prices. Beyond 2008, farm-gate beef prices are forecast to rise due to an expected depreciation in the New Zealand dollar.
Bovine spongiform encephalopathy (BSE)In 2003, bovine spongiform encephalopathy (BSE) was discovered in US and Canadian cattle. Japanese and South Korean authorities promptly banned beef imports from the US and Canada. This left Australia and New Zealand as the only countries able to export beef into Japan and South Korea. Prices for New Zealand beef in Japan and South Korea increased markedly and export volumes rose. The total volume of beef imported by Japan and South Korea remains, however, well below pre-BSE levels. This suggests Australian and New Zealand grass-fed beef has not filled the gap left by US corn-fed beef, and that once the US regains access to the Japanese and South Korean markets, demand for New Zealand grass-fed beef will fall. |
Exports
In the year ended 31 March 2007, 367 000 tonnes of beef were exported. (See Table 13.1.) This earned $1816 million, up 5 percent on the previous year due to higher prices.
The value of New Zealand’s beef exports is expected to decline in the year ending 31 March 2008 as international prices for New Zealand beef gradually fall off their current highs and the New Zealand dollar remains strong.
In the following years, the export value of beef is forecast to rise, driven by a fall in the New Zealand dollar.
Table 13.1: Beef prices and volumes
| Actual | Forecast | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||
| Schedule manufacturing beef price1 (cents/kg) | 193 | 225 | 233 | 252 | 238 | 253 | 274 | 288 | |
| Schedule prime beef price1 (cents/kg) | 295 | 318 | 311 | 332 | 301 | 314 | 340 | 357 | |
| Export volume2 (000 t) | 397 | 415 | 381 | 367 | 371 | 379 | 383 | 381 | |
Notes
1. Year to 30 June, 2007 figure is estimated.
2. Year to 31 March.
Source Meat and Wool New Zealand, Statistics New Zealand and MAF.
Renewable transport fuel and agricultureThe international trend towards turning food into fuel is most apparent in the US where the goal is to reduce dependence on foreign oil. The production of ethanol from corn in the US has increased rapidly in recent years and is expected to continue expanding. At the same time, demand has increased because of high oil prices and federal government-mandated ethanol sales targets, tax credits, and an import tariff. The price of corn in the US is forecast to significantly increase. Livestock industries in the US feed their animals corn to produce beef, dairy products, chicken, and pork. All these industries are expected to respond to higher corn prices by reducing production (or slowing their rate of growth) and passing on higher costs to consumers. This will benefit New Zealand beef producers as the US is the biggest market for New Zealand beef. New Zealand dairy producers will benefit less directly as US dairy producers will be less able to respond to higher international dairy prices and export into international markets. More generally, New Zealand’s trade advantage in pasture-fed animal-protein products is being enhanced by the trend towards turning food into fuel. |
Production
In the year ended 31 March 2007, total beef production increased 2 percent. Most of this increase came from a 4 percent increase in the slaughter of steers. Beef sourced from culled cows continues to increase as the dairy herd increases, although this makes up only 23 percent of current total beef production.
In the year ended 30 June 2006, total beef cattle numbers were 4.4 million, up just 0.4 percent from the previous year.
New Zealand beef production is forecast to increase in the years ending 31 March 2008 and 2009 and then decline. The number of steers and, eventually, steer slaughter rates are forecast to decline in response to weaker prime beef prices.
Contact for Enquiries
Manager
Monitoring and Evaluation
MAF Policy
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
Fax: +64 4 894 0741
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