Record high meat prices have stolen the crown from dairy prices, leaving farmers feeling flush.
Westpac agri-economist Nathan Penny said the trend was set to continue, and prices would still be strong in autumn, when they were traditionally at their lowest.
With demand improving in all export markets, he said “It’s meat’s turn right now. It’s quite a big story and will remain so over the season.”
In July, mutton prices hit $6.40 per kilogram, setting a new record high. They lifted further in August to reach $6.60 per kg, which took them higher than beef prices.
In September, lamb prices hit $9.40 per kg and beef steer prices were at $6.28 per kg, which closed the gap on the record set in 2019 for beef of $6.20 per kilo. Both were new record highs, Penny said.
High lamb prices were likely to last well into 2022, he said.
“The US demand is excellent. There’s not a lot of meat around, grain prices are high and Brazil has just had mad cow disease, while china is still suffering with swine flu.”
The milk price was sitting at either side of $8 per kg of milk solids and horticulture returns remained “very healthy”.
The rapid expansion of kiwifruit planting was now weighing on prices and record high crops might fetch lower orchard gate returns per tray for the first time in several years, Penny said.
“It has got to a point where it has started to mature and you’re getting top-heavy land prices and licenses are also getting very high. So maybe we are getting to a point where the one way traffic is coming to an end.
”It was quite remarkable the last few seasons as they were growing production and exports by well over 10 per cent but still getting improvements in gold returns.”
Normal supply and demand was kicking back in, he said.
Orchard gate returns for gold and green kiwifruit were down 10 per cent on the same time last season and higher transport costs were hitting exporters. The impact of that would lead to an OGR of around $10.50 per tray for gold and $6.40 for green.
But all this clover was helping to push input prices higher. When farmers had money to burn it meant suppliers could hike prices, Penny said.
Prices for things like feed, fertiliser and labour were heating up, and interest rates were set to go higher.
“Supply chain issues are a part of that. Shipping costs are incredibly high but on the other side, demand is strong and incomes are high.”
Westpac was predicting a 25 basis point rise in the OCR next months, followed by another hike in November, he said.
But while farmers were feeling good about prices and their economic contribution to the GDP, it was dampened by the prevailing mood of being overburdened with regulation and struggling to find workers.
“The labour issue is really rough. It’s nigh on impossible to get staff.”
While the Government was letting in vaccinated seasonal workers from the Pacific Islands quarantine free, the backpackers were still missing. They made up on average about a third of the seasonal workforce, and a tight labour market meant locals who might go fruit picking were employed elsewhere.
“So they are potentially missing 40 or 50 per cent of their workforce because locals can get jobs in other sectors. There isn’t any light at the end of that tunnel and people are revisiting their plans.”
Last year, crops were left to rot and this year looked set to be worse for growers.
And while farmers were generally stoic and didn’t like to whinge, the planned Groundswell protests in November were likely to be even bigger than the July protests.
”Groundswell has risen up. It might not be the right word any more. Farmers are fed up and want to be heard. So the Government does need to listen,” he said.
