LAMB
More lamb schedules lifts this week, as supply tightens and processors desperately try to satisfy regular customer requirements.
Chilled negotiations are having to cover exchange rate lifts and how much will be returned to the farm gate is yet to be seen.
Some analysts are predicting early lamb prices of $6-$6.20/kg but only briefly, with values falling to an unsustainable $5.10-$5.25 in January 17.
With so much farm profitability dairy focused, the sheep sectors demise has gone under the radar, but if these levels do eventuate in a year where Beef and Lamb NZ predicts 700,000 fewer lambs, the financial pressures will shift to sheep farmers.
Many of the early lambing areas in the south and east of both islands are still dry but report good survival at lambing although are concerned how they will feed them.
Local trade prices are rising faster in the north than in the south, but average Canterbury saleyard values for prime lambs are now in the $123-$127 range.
WOOL
This week’s South Island wool sale was again weaker and vendors only sold 78% of the sale, in spite of offering some of the best pre lamb fleece of the season
The European buyers continue to dominate the sale and the lack of Chinese activity is a worrying trend.
Fine wools also eased back in price to now sit at Australian levels, although the offering of high tensile strength Merino wools, attracted good premiums.
BEEF
Beef schedules were stable again this week, as Rabobank predicts that US beef prices at retail will fall 22% this year.
Analysts suggest some readjustment of the manufacturing grades could occur on the back of easing US demand as processors look to recover profits after earlier margins looked thin.
Firstlight Foods have been promoting grass fed wagyu beef calves as an alternative option for beef farmers in the region to fill the gaps from reduced dairy support.
Store stock that is available is receiving strong demand with some young animals selling for more than $3/kg in southern saleyards, and early bobby calf sales seem to be well ahead of last year’s prices.
Local trade schedules in the north have now made $6/kg cwt are are 30c/kg ahead of the south as demand for quality animals builds.
DEER
More stable venison schedules again this week, as demand remains strong but farm gate returns are hampered by the strong Euro against the Kiwi.
Servicing existing programmes and new market initiatives are the focus of all processors as the industry realigns with a reducing supply due to a reinvestment into female breeding stock.
Chilled exports are growing with the shortages with Belgium being where the biggest volumes were sold but the Swiss pay the most per kg.
Velvet production is predicted to grow to 600 tonnes this year with China being the main destination of the product, although industry officials are hopeful the tariff concessions achieved via the NZ- Korea free trade deal will increase the competion between the purchasing countries.
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9 Comments
The downtrend has resumed in CME cattle futures. Without a shred of ambivalence, and after about a day and a half rally, the market is down triple digits and the possibility of new lows is very real.
http://finviz.com/futures_charts.ashx?t=LC&p=m1
If the lift in dairy prices is a new trend over the next few months, then there will be a real shortage of manufacturing beef available this summer.
A lot of processors will be forced to lift their prices to fill their share of the export quota which has already been reflected by increasing bull beef prices despite the rising exchange rate.
The real pressure will be on the margins of the processors rather than farmers this season I believe.
NZ beef is but a little piddle. Brazil/Uruguay have 280 million head and now exporting to the States and China, India has 310 million head, the USA is number five, Canada Mexico and the USA have 126 million head. Argentina is back exporting to the States. Now Russia is turning uphttp://www.globalmeatnews.com/Industry-Markets/Russia-s-meat-industry-w…
Cash cattle prices, reaching the lowest level since 2012 this week, have dropped about $62/cwt in 23 months, the largest 2-year consecutive decline since the 1970s on a percentage basis. Live cattle futures have dropped almost $70 or 40.7% in the same time frame, just shy of the 1970s debacle. Of course there was a commodity price freeze in June 1973 that started that mess, so again, this break in cattle prices stands alone for its magnitude and its lack of an external market-moving event.
http://finviz.com/futures_charts.ashx?t=LC&p=m1
Aussie is worried
http://www.beefcentral.com/trade/august-beef-exports-show-dramatic-year…
Continuing losses in the live cattle contract are expressing the opinion that the move downward is not over. More volatility in futures prices was not surprising to those who barely blink when prices change dollars in minutes. Experienced traders see a capitulation feel to the market but few are ready to stake a bet on it.
Department of Amplification
A friend of ours called his local order buyer bright and early this week and conveyed the following message:
"i wanted to call you before you called me and tell you i won't be wanting or buying any cattle this week. Furthermore, I won't be ever buying any more cattle so please don't call and pester me. If I should call you in a few days and order some cattle, don't believe me and if you ship them, I won't pay for them. I am recording this message and will be archiving it for future use."
Jeez Andrewj - even Muldoon finally got it right about a sharemarket downturn, its just that he had been preaching the same message for years beforehand. I actually do agree with your sentiments on which way the beef job is going over the next six to twelve months, to the point I am worried about the financial wellbeing of some of our processors especially if they buy and hold inventory on a falling market like they did with lamb a couple of years ago. The banks must be buying into the beef story as my banker and their regional manager was surprised at my less than optimistic forecasts for my business for export cattle prices going forward. The light prime local will hold as they are unable to substitute aussie beef as it is too dear at the moment with their short supply. I don't think it will crash and burn but we could see a $4 in front after xmas especially if it gets dry.(something NIWA wont predict again)
I actually have been an optimist about the beef market up until June when I sold my cattle. Sometimes the stars all line up and the wheels come off.
The market was distorted by large numbers of heifers being retained, as prices firmed due to shortages of cattle coming forward, even more heifers were retained. Where I used to work in Canada they always had around 300 cows now it is more like 1500 and there are cows all over Alberta, as grain prices have been low enough to force farmers to look for other options.
The other problem was the enormous amounts of money going into futures markets when Bernake started his money for free policy at the Fed, money traded on ag futures went up 27x.
Then the market signals of high beef prices gave Brazil the signal to increase herd sizes, and that message also got to other big producers.
Then along comes a period of very cheap feed in the States and that looks to continue with Russia now the worlds biggest Wheat exporter.
I actually think we are facing a game changer, Russia becoming self sufficient and soon a large agriculture exporter, huge herd rebuild in Sth America, USA, Canada, Mexico, and falling consumption patterns and falling middle class wealth.
Our Bull beef market was always a bit of an outlier and now sth America has the same CL beef and yet runs at poor efficiency with a lot of potential on the upside with better management.
In California prices have more than halved, yet somehow we think we are unconnected, the only thing saving us is the buying power of China and are you confident to bet on them still being in the market now Brazil and Argentina are knocking on their door?
After all we are in the protein game and there is a hell of a lot of protein out there, but it's still better than grain.
http://finviz.com/futures_charts.ashx?t=ZW&p=m1
I think that beef entered bubble territory and now the bubble has burst, which is why I think it is so dangerous. Just like the dairy bubble no one saw it was a bubble on the way up, now the pundits all say how obvious it was.
It's a problem trawling through all the bullshit, and there are extra layers at present. Trying to find out what is really happening in markets is very difficult, I think deliberate obfuscation, so it's a matter of trust, Beef and Lamb who are wrong nearly all the time or look at whats coming out of markets. Perhaps governments can pull enough levers to stop the market performing as it should but that just creates more supply and worse corrections.
So I'm betting on a huge correction, one that comes into line with long term trends and if the dollar stays up, it will have a 3 in front of it.
http://www.canadiancattlemen.ca/2016/08/16/comment-opening-the-door-to-…
http://beef2live.com/story-brazil-beef-situation-2016-0-141974
http://www.globalmeatnews.com/Industry-Markets/Brazil-to-sprint-past-US…
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