Of comfort to farmers emerging from a tough year of high costs and low farmgate prices is a golden run in cattle prices with bull values at about $7 a kilogram.
Lamb returns are also rising and mutton has made a solid comeback.
Red meat export returns are projected to increase by $1.2 billion in 2024-25 — up 13% to $10.2b — by Beef + Lamb New Zealand’s (B+LNZ) mid-season update.
The industry body’s economists have found the red meat sector is on track for farm profitability and export returns to bounce back.
At this stage, weaker demand from China is being offset by more sales in the United Kingdom, European Union and the United States and Canada.
Yet to come into this equation are the trade wars ignited by US President Donald Trump’s tariffs against China, Canada and Mexico and retaliatory tariffs placed on US goods.
B+LNZ chairwoman Kate Acland said the improved global market conditions were encouraging for farmers and the economy, but challenges remained.
"What we are seeing is a significant turnaround from the previous season and we’ve got farm profitability almost double what it was last year. The really important point is the $6.4b that will end up in farmers’ pockets we know that 80% to 90% of that will be spent and stay in local communities. When agriculture does well NZ does well."
Strong demand and a lower New Zealand dollar had lifted red meat prices, she said.
"There are, however, risks on the horizon. We are keeping a very close eye on US trade policy developments, which have the potential to create global market volatility."
Mrs Acland released the update in mid-March and discussed its findings with Minister of Agriculture Todd McClay at Mount Somers Station in Mid Canterbury.
Mr McClay has been working through the trade position with US officials.
He said US exporters mainly faced lower tariffs than NZ exporters did in the US.
If the US was looking at tariffs in other parts of the world, it should leave New Zealand out because it was a good trade partner for the US, he said.
"There is no indication that the US is singling New Zealand out or has a focus on us. If the administration decides to put tariffs on all food imports to support their farmers then, yes, we will be captured as every other country will. But it is too soon to know whether it’s country-specific or product-specific for everybody."
Mr McClay said he did not know of any upsides to tariffs escalating around the world, as it harmed economies and businesses lost confidence to invest.
However, China tariffs on US exports would mean they still needed beef for their restaurants and supermarkets.
"They will turn to countries like New Zealand that they already trade with to buy more. So there will be opportunities around the world for New Zealand, but I do want to be clear: tariffs across the board, including New Zealand, will be harmful to exporters in that market."
The government was not looking at retaliatory tariffs if the US placed tariffs on New Zealand goods, but it was looking at all options, he said.
Mrs Acland said she had just returned from the US and got the impression New Zealand was not the target.
The US viewed New Zealand as a trusted trading partner, she said.
"We provide product they need, which is that lean beef trimmed to go with their hamburgers."
New Zealand had enjoyed free and open trade access with diversified high value markets and this had helped turn around farmgate returns this season, she said.
Farmgate prices have lifted, with lamb prices forecast at $8.06 a kilogram to reach $155 per head, up 20% from last season and 9% above the five-year average.
A big mover is mutton prices, expected to rise from low levels to $90 per head — a 70% increase on last season.
The B+LNZ update predicted cattle prices would hit record levels, with an all-beef price of $6.18/kg, up 16% on last season and 20% above the five-year average and this has come to play.
US demand for imports of red meat continues to be strong, at a time when they have a record-low beef cattle herd.
As a result, farm profits are set to improve with the average forecast at $106,500 — nearly double last season’s $56,400, but still below the five-year average.
Mrs Acland said the lift in profitability was good news, but costs remained a concern.
"While revenue has improved, farm input costs have risen 33% over the past four years, meaning profitability is still below long-term sustainable levels."
Regional economies are expected to win from sheep and beef farmers daily spending about $15 million on goods and services, with much of that staying in local communities.
The update found shifting global trade patterns played a key role in the sector’s recovery.
While China remains an important market, exporters have diversified, increasing shipments to markets where demand is stronger.
"Farmer confidence is slowly recovering, but regulatory uncertainty around climate change, freshwater and other policy issues continues to weigh heavily on their minds," she said. "Stability in these areas is critical for long-term confidence and investment."
Falling interest rates are helping, with the recovery of farmers depending on debt levels and how they come out of drought and storms.
Mr McClay said the US did not have the beef it required and the arrival of trade tariffs would suggest they would have shortages despite their ability to increase production quickly.
Lean NZ beef exported to the US was "extremely complementary" for their burger meat, he said.
NZ’s FTAs were well balanced with diversified markets for whatever played out.
tim.cronshaw@alliedpress.co.nz
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