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Plenty of grass and strong schedules driving positive livestock market

July 2017

Good autumn grass growth and positive markets led to vibrant trade in livestock throughout autumn.

 

For dairy farmers, regular auctions throughout April and May helped provide solid market indicators on which to trade cows, particularly in the North Island.  Good-quality stock sold at firm values approaching $2,000 per head; medium-value stock held steady; and poorer-end stock decreased in value. Across the board, willing sellers came together with willing buyers, agreeing on price and establishing reliable market levels.

North Island prices for rising two-year-old heifers went through a similar price resetting process, finding a range from $1,000 to $1,700. Outside enquiry from the South Island, where prices remain higher than they are on the North Island market, was a feature.

With live export companies offering more generous prices than the domestic market, values for rising one-year-old heifers lifted substantially to levels between $1,100 and $1,150 per head. Payout forecasts for the 2017/18 season mean these prices also represent a good trading option for farmers ready to bring heifers through for next season.

As confidence in the sector returns, farmers are assessing how best to milk more cows. 

Through the downturn, many operated with reduced herd sizes, which they are now ready to rebuild. While many will do that by natural increase, others are coming to the market, where the auction system has the capacity to satisfy all buyers.

 

This autumn has been notable for the lack of cull or boner cows coming out of herds. With lower herd numbers and such good autumn conditions, many farmers are milking longer than they expected, bringing in increased revenue.

Notably, buyers are going across districts, trading outside their home localities. This trend has developed across the course of the autumn where, earlier in the season, farmers were only looking in their own backyards.

For sheep and beef categories, the picture is also rosy.  Weaner cattle are selling at record values, fetching $150 to $200 per head more than prices during the corresponding period last year. With abundant autumn grass growth, strong demand out of Europe, and China back in the market, prices for sheep are also on an upward trajectory. Both the lamb schedule and the store prices schedule rose considerably during the autumn. Values of $6 per kilogram for both beef and lamb are encouraging for farmers.

Underlying factors include increasing demand out of Asia and the United States, where
New Zealand’s market access has improved. While Brexit is also working in favour of
New Zealand at present, as British supermarkets are finding it difficult to put lamb in their cabinets, this might only provide a temporary benefit.

 

A scenario of plenty is playing out for sheep and beef farmers. There may be insufficient livestock across New Zealand to consume all the dry matter that the favourable autumn weather has produced. Demand for animals to capitalise on this outstrips supply and it is rare for so many districts across the country to have so much grass at the same time. It is a positive ‘problem’ for farmers to have.

One impediment to the livestock market is the upper South Island’s damaged freight and transport network, still under reconstruction following the November 2016 earthquake. Stock that might previously have been shipped from south to north are now more likely to stay in the South Island after logistics became more much problematic following the quake.

 

With the abundance of autumn grass, stock is likely to largely maintain current values throughout winter, with some upside possible in sheep, although cattle prices may ease a fraction.

This year’s Beef Expo in Feilding, in May, indicated the confidence of farmers, with 110 good-quality bulls from a range of breeds under the hammer. Hereford breeders came to the fore, met by strong buyer support. Of 22 Hereford bulls offered for sale, 20 sold, the most sought after being a North Canterbury bull that changed hands for $40,000. Hereford bulls at the sale averaged $14,084.

Top price paid among the 21 Angus bulls sold was $34,000. Angus bulls averaged $12,476 at the sale; Simmentals $5,260; and Gelbviehs $5,000, while the top priced Charolais changed hands for $10,000.

Farmers are now prepared to pay $500 to $1,500 more for quality bulls than last year’s sales values. Genetic innovation in the commercial area is focused on performance improvement, particularly around fertility and quality, with better genotypes and phenotypes sought after. Although bulls capable of lifting the performance of a herd are at a premium, breeders are making big improvements all the time, ensuring better weaners on the ground. Bulls able to produce depth, width and durability are in demand, with farmers prepared to invest in animals that will ensure these characteristics in their progeny.

 

This report was prepared in consultation with PGG Wrightson’s livestock team