Early Bird I Tuesday 7th May 2024

Red meat exports take a big hit, new science advancements could threaten the existence of Kiwi dairy farms and sheep and livestock numbers drop across the country. Welcome to Proud Country's Early Bird - The top things you need to know that impact rural New Zealand delivered to you by 5am, because who doesn’t need better chat beyond the weather! 1. Red meat exports take a big hit New Zealand's red meat sector faced a challenging start to the year, with exports totaling $2.58 billion in the first quarter, down 5 per cent compared to the same period last year, according to the Meat Industry Association. The decline was largely attributed to weaker pricing and demand in China, however, there were positive signs from other markets, with North America showing good demand and signs of recovery in the United Kingdom and Japan. Despite the overall decline, sheepmeat export volumes increased by 3 per cent, and beef exports rose by 2 per cent. However, the value of sheepmeat exports decreased by 5 per cent to $1.04 billion, while beef export value remained unchanged at $1.08 billion. One encouraging trend was the performance of chilled products, which saw an increase in both volume and value. Chilled sheepmeat exports rose by 17 per cent in volume and 11 per cent in value, with notable growth in exports to China. Chilled beef exports also saw significant increases of 26 per cent in volume and 28 per cent in value. Looking at March specifically, total exports were down 9 per cent compared to March 2023, primarily driven by a 35 per cent drop in exports to China. However, exports to the United Kingdom, Japan, and Canada showed positive growth. In the sheepmeat sector, exports to the US increased significantly, while exports to China experienced a decline. For beef, exports to Japan saw notable growth, offsetting declines in exports to China. Overall, fifth-quarter exports were down 18 per cent, with most categories experiencing a drop in value compared to the same period last year, except for edible offals, which increased by 12 per cent. 2. New science advancements could threaten the existence of Kiwi dairy farms A new scientific advancement known as precision fermentation could pose a significant threat to New Zealand's dairy industry by offering a substitute for cow's milk through lab-created cow protein. Precision fermentation of dairy proteins offers a straightforward method to produce proteins without relying on traditional dairy farming. A recent study funded by the National Science Challenge delved into the effects of alternative proteins, including plant-based proteins and lab-grown meat, on land use in New Zealand.  The study projected a potential reduction of up to 35% in land used for dairy farming if farmers transitioned to growing crops instead. Fonterra has been actively researching and investing in precision fermentation for several years. However, scaling this technology to an industrial level faces hurdles, including potential shortages of sugar feedstock and the current inability to replicate all the nutrients found in milk. Professor Hugh Campbell from the University of Otago says there is an urgent need for New Zealand to invest in research to stay ahead of technological advancements and that the agricultural and research sectors must prepare for significant shifts that could impact traditional farming practices.  3. Fonterra Shareholders Council is concerned that Fonterra did not deliver an update on its long-term strategy as promised Fonterra's Co-operative Council, has expressed disappointment over what it perceives as a failure by Fonterra to provide essential information to its members. In its quarterly update, the Council is concerned that Fonterra did not deliver an update on its long-term strategy as promised, leaving shareholders without anticipated insights into the company's direction through 2030. Despite inquiries, Fonterra responded that the strategic work is ongoing and updates will be shared when ready. Secondly, the Council noted lapses in reporting efficiency metrics announced last September. While one metric was reported to the NZX, it was not shared with co-op members during interim results meetings or in the 2024 interim report. The second metric, gross profit per kgMS, was not reported against at all. In response to these concerns, Fonterra explained that it chose to report the Opex per kgMS figures to all shareholders through the NZX, citing seasonality and metric formula considerations for the annual reporting of gross profit per kgMS. The Co-operative Council has been vocal about the need for greater transparency from Fonterra regarding financial information, especially relating to capital allocation and investment details.  Fonterra's board has responded and reiterated its commitment to transparency while considering commercial sensitivities, highlighting various information sources provided to shareholders. 4. Sheep and livestock numbers drop across the country Stats NZ has released figures showing a notable decline in New Zealand's national sheep flock and livestock numbers for the year ending June 2023, primarily attributed to a reduction in grassland area. The national sheep flock decreased by 3% to 24.4 million sheep, representing a decline of 770,000 sheep compared to the previous year. Similarly, total beef cattle numbers fell by 4%) to 3.7 million, and dairy cattle numbers decreased by 45,000 to 5.9 million during the same period. From 2011 to 2023, the total area of grassland decreased by 12%  corresponding with a 22% reduction in total sheep numbers and a 5% decrease in total beef cattle numbers over the same period. Jones emphasized the significance of this reduction in grassland, equating to an area roughly equivalent to 15 Lake Taupōs, but noted that some of the land previously used for grassland farming has been converted to forest, with an 11% increase in pine and other exotic forest observed between 2011 and 2023. Additionally, dairy cattle numbers peaked in 2014 and have since declined by 12%, except in Canterbury, where there has been a 2% increase in total dairy cattle since 2014.  5.  Rural property market continued to struggle in the first quarter The rural property market continued to struggle in the first quarter of this year, with a significant decline in both the number of farms sold and median selling prices compared to the same period last year. According to the Real Estate Institute of New Zealand, there were 215 farms of all types sold across the country in Q1 of 2024,  a 13.3% decrease compared to Q1 of 2023 and a striking 48% decline compared to Q1 of 2022. The median price per hectare in Q1 of this year was $25,130, showing a 15.4% decrease compared to Q1 of last year. Over the year to March 2024, 957 farms were sold, a significant decrease of 387 sales compared to the previous year. Dairy farms experienced a reduction of 37.3%, dairy support farms down by 10.9%, grazing farms decreasing by 38.3%, finishing farms by 28.3%, and arable farms down by 2.2%. Despite better-than-expected farm gate milk prices and positive outcomes from Global Dairy Trade auctions, the dairy sector has not experienced increased sales activity. See omnystudio.com/listener for privacy information.