BusinessDesk: Lamb numbers stay low, but high prices also stay: Westpac

By Russell Palmer

New Zealand lamb is expecting its second smallest season in 55 years, while Australia’s flock is expected to rise by 5.4% this year.

However, high lamb prices and a high Aussie dollar mean New Zealand lamb farmers can expect competitive prices, despite the smaller national flock.

Good grass growth this year has farmers looking to rebuild their flocks or hold onto lambs for longer, with a 7 percent lift in flock size from last year’s 55 year record low, according to analysis by Westpac for its farmer clients.

For dairy farmers, Westpac says New Zealand exports are looking better in coming months after milk prices fell in the first half of the year.

Despite an increase in international milk production, New Zealand dairy farmers have seen increased prices over the last few months from a lower kiwi dollar and higher dairy prices.

This is on top of excellent pasture conditions in many regions this spring, providing stronger milk output.

With the European debt crisis looming over global markets, interest rates and export prices are both expected to rise over the next year, and Westpac warns the increases could be steep.

“Given our view that markets are currently underestimating how quickly interest rates will rise over the next few years, we see two to three year fixed interest rates as a relatively attractive option,” Westpac says.

This will likely mean an increase for the New Zealand dollar over other currencies, with the exception of Australia.

Fortunately for kiwi exporters, the New Zealand dollar will remain competitive, despite a slowing Australian economy, until global credit stress eases.

(BusinessDesk)