WELLINGTON, N.Z. — Strong increases for both lamb and beef prices for 2009 are being forecast by Meat & Wool New Zealand’s Economic Service. Lamb prices at the farm gate are expected to be up 38% higher than last year while beef prices are forecast to increase 11%.

The Economic Service’s Mid-Season Update signaled a continuation of the improved pricing farmers have seen compared to last year, said Mike Petersen, chairman, Meat & Wool New Zealand. Both lamb and beef returns were on a positive trend and that appeared set to continue in contrast to other agriculture exports.

The average profit for sheep and beef farmers in 2008-09 will remain low, but improve on the 50-year low experienced last year, the report states. Farm profit before tax was $16,700 in the 2007-08 year and is forecast to be $45,600 in the 2008 09 year. Farm profit before tax has to meet debt repayments, tax and the farm family living expenses.

Even though farm revenue is up on last year, on-farm expenditure has to be tightly controlled to combat high on-farm costs increases of the past two years, said Rob Davison, Economic Service executive director.

Depreciation of the New Zealand dollar has been positive for the export sector as lower interest yields and greater global financial uncertainty has made investors risk-averse to investing in other currencies, Mr. Davison said. "The more export favorable New Zealand dollar has already had a positive effect, and underpins higher farm-gate returns for 2009," he added. "Total sheep and beef farm earnings at the farm gate are estimated to increase by $500 million to $4.4 billion, a positive for the economy."

Lamb prices at the farm-gate are expected to average $80 per head in 2008-09 compared with an average of $58 per head last year, Mr. Davison said.

"Overall, the increase in lamb price is due to tighter global supplies of lamb from New Zealand, Australia and the EU and the depreciation of the New Zealand dollar particularly against the Euro and the U.S. dollar," he added.

Farm-gate beef prices will be positive in the short-term, and could strengthen further into 2010, Mr. Davison predicted. "The price increase for beef will be underpinned by the depreciation of the New Zealand dollar and strong U.S. demand for manufacturing beef as consumers trade-down to lower-value market segments, such as hamburgers," he added.

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