Silver Fern expects cattle, lamb prices to drop next season, venison to remain strong

Friday 22nd September 2017

Silver Fern Farms expects a mixed season, with beef and lamb prices expected to drop as more supply becomes available while venison prices will remain strong.

The new season begins on Oct. 1. Silver Fern's chief executive Dean Hamilton, who resigned in July and will leave at the end of the year, said store stock markets for beef "appear over-heated" and current prices reflect a supply shortage which is typical at this time of year.

"However, once volumes pick up, and assuming the currency stays at current levels, we believe schedules will retreat to more accurately reflect end-market conditions," Hamilton said. "A number of commentators are pointing towards a recovery in beef volumes out of Australia and the US after rebuilding periods, which we will need to be mindful of. China’s demand is increasing, but not at the near-term pace of this competing supply."

Hamilton said the company expects cattle numbers to be similar or slightly up on this season. Some of the retentions out of the dairy herd last year are expected to boost bull and even heifer numbers, he said.

Chinese and US demand for lamb is currently strong, with the European chilled supply season beginning in October set to maintain farm gate prices, but returns are expected to decrease after that "given the greater frozen mix", Hamilton said.

"We would normally see a $1.00/kg rule of thumb difference in value from the Christmas chilled period to the main part of the season – everything else being equal."

Lamb numbers are expected to increase this season, with volumes up between 5 and 10 percent to mean 20 million lambs could be processed next season.

Venison markets are strong given lower supply from New Zealand, with market prices in Europe and the US up from last year, while new premium trim markets in the US are adding to the overall value being realised, he said. Silver Fern sees those conditions continuing, and expects venison numbers processed to be similar to the current season at around 280,000 to 300,000.

Silver Fern Farms voted last year to sell a half stake in the business to Shanghai Maling for $267 million, enabling it to repay its debt, removing a threat from its banking syndicate to withdraw support. The original cooperative of farmers owns the remaining half, although Shanghai Maling has the casting vote on key strategic issues. The meat processor posted a loss of $30.6 million last year in what it called a "very challenging year across the industry".

(BusinessDesk)

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