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18 December 2002
Favourable product prices in recent years will see New Zealand cattle numbers increase over the next couple of years, resulting in higher beef production and exports.
This is the key projection for the beef and veal industries according to Ministry of Agriculture and Forestry (MAF) forecasts set out in the latest Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) December report.
However the report says cattle numbers and beef production and exports are forecast to fall cyclically thereafter.
MAF says rising United States beef prices are projected to peak in the year ending September 2004. Following a peak in 2001, New Zealand schedule prices are projected to decline steadily over the forecast period out to 2006 due to the expectation of an appreciating New Zealand dollar.
Looking at the period 2002/03 out to 2005/06, the SONZAF report on beef and veal projects a rise in the production on inspected beef and veal of seven percent to 616,000 tonnes cw in the year to September 2003. This is due to increasing numbers of bull beef and cows of dairy origin.
An expansion in production is projected out to 2004, and thereafter a cyclical downturn in beef production results in a projected 566,000 tonnes cw in the year ended September 2006, due to lower beef prices in New Zealand.
The current high availability of meat in the US constrains both beef and veal prices and, along with a current quota, limits opportunities for New Zealand to increase its exports there.
The annual average prices for New Zealand manufacturing cow are expected to fall to 221 USc/kg in the year ended September 2003, peak at 228 USc/kg in 2004, and then fall to 203 USc/kg by 2006. Over the forecast period, an appreciating NZD countervails any gain from the higher US beef prices in 2004.
Looking at a longer-term outlook, the report says a key issue likely to affect beef prices in the next decade is the balance between production, supply and demand for imported beef in the Asian markets. While Asian countries do not currently consume much beef or veal, the scope for New Zealand to export more to these countries increases as their economies grow, incomes rise and tastes change.
Another issue is the extent to which South America may eventually recapture a share of the North American market. Re-entry into the North American market will require the key South American producer countries to be certified free of foot and mouth disease.
A third issue is the possibility that over the long term, World Trade Organisation negotiations could lead to either increased quota levels or the dismantling of quotas altogether. It could also lead to reductions in export subsidies. These developments could lead to an expansion of South American countries into our traditional export markets. They could also, however, enable New Zealand to increase its exports to the US.
For further information, please contact:
Rod Forbes, Senior Policy Analyst, MAF Policy