Sunday, 22 November 2009

Beef, lamb and dairy prices

The Press takes a look at developments in beef, lamb and dairy prices.

In the past month, the value of the New Zealand dollar has declined by 3 per cent against the British pound. However, this is still 13 per cent above its level at the same time last year, and 17 per cent above the average of the previous five years.

Meanwhile, the British CKT lamb leg price (cost, insurance and freight) is at the same level as this time last year and appears to have hit a ceiling for now. This would indicate exporters' margins have reduced in the past year, which is now being reflected in the falling schedule prices at the farm gate.

Why we sell our lamb at the UK lamb prices is stunning. NZ lamb is the best in the world, we must brand it as such, and be more expensive than other lamb...because it is the best! We still have a long way to go. We have to stop being commodity exporters and export a brand! KT

A further decline in schedules of up to 15 cents a kilogram was experienced across the country, with the larger falls occurring in the North Island. This has seen the schedule price of a 17.5kg lamb slip below $90 for the first time since March. Prime lambs at saleyards appear to have come into line with schedules, particularly in the North Island, where a medium prime lamb is fetching just under $90. In the South Island, the same lamb has an average $97 price.

United States imported bull gained a further US2c/lb this week, lifting to US142c/lb. The US6c/lb lift in price over the past two weeks has come about as the availability of imported bull remains tight. It is still early in New Zealand's new slaughter season, but bull numbers are already well down on where many market participants expected them to be.

Figures for the five weeks of the new season suggest New Zealand is already 6000 head down on its five- year average as good grass cover remains prevalent across the country.
As mentioned in earlier reports, this rise in price will be tested when an influx in slaughter numbers is seen.

US imported cow gained US1c/lb, as the US domestic market looked to firm slightly on the back of improved export figures to Asia. US imported cow finished the week at US131c/lb. The strengthening US imported market has flowed through to farm gate prices, with an average 4c/kg lift in schedule prices across the grades.

Grain fed beef is more expensive than grass fed beef. But NZ cows live on average 7-8 years longer than US cows. NZ cows are outside eating grass in the sunshine. US cows are inside, standing on concrete and eating corn. It's like battrey hens. I know which beef I would rather eat, and yet most of our beef goes into mince for burgers. It is a crime. KT


The NZX Agrifax weighted- average dairy commodity price peaked in November 2007 at US$5460 a tonne, before it fell 58 per cent over the course of 18 months to bottom out at US$2290 in June. Since then, the weighted-average dairy commodity price has recovered almost half of these losses, this week lifting to US$3990/tonne.

This highlights the volatility of the dairy commodities market. Anhydrous milkfat's rapid price gains over the past couple of weeks simmered this week, with only a 2 per cent rise from US$4800/tonne to US$4900/tonne. Casein and cheddar had minimal gains of 1 per cent to US$8200/tonne and US$3800/tonne respectively.

Underlying demand for wholemilk powder remains firm, adding a further US$100/tonne this week to reach US$3500/tonne. Skim milk powder's gain was slightly larger at US$150/tonne to US$3350/tonne. Butter firmed over the week, climbing 7 per cent from US$3450/ tonne to US$3700/tonne.

More than 50% of French milk goes into making cheese. Most of the exported NZ milk production goes into milk powder, the lowest end of the product range. We have to go up the value chain, then our produce exporters will be able to handle a stronger currency without getting killed.

When you have a brand, if the exchange rate goes up, you put the price up!
If you export a commodity, you are stuck with the overseas price.

We must change the model, or we are doomed!! KT


Anonymous said...

Do you have a clue what you are writing about!?!

Kiwi Trader said...

Do you?

jesuscheung said...

hi kiwi trader, how's your yen positions? yen had been strong like mad!

peterquixote said...

always good to read you dude,
being dumb, I usually have to come back and read again,
I still suffer badly from my exposure to NZ agriculture shares,

Kiwi Trader said...

Have not changed any positions, as I see current moves as temporary.

UAE will help Dubai as needed, it is just a family spat, and I see little reason for it to affect global markets in the long run.

The strength of the yen is the same old USD weakness issue. As I am not short yen against the USD, but against the AUD and the NZD, both local currencies will rise to compensate.

Australia will raise interest rates tomorrow and that will push the AUD higher as well.

Will update positions later tomorrow when I get a sec!

Kiwi Trader said...

Peter, hang on to your shares, you will be fine.

NZ agriculture has a very bright future!

Adam Smith said...

Price is not that cockamamie to be average. Price is more oddball

Penny Stocks said...

Food prices have no where to go but up.