Analyst Intel

19 February 2021

PULSE | Market, weather encourage optimism

New Zealand farmers’ nerves have been wracked since the middle of last year when the summer drought finally came to an end. No one will need reminding of how challenging the drought was, especially as the effects were compounded by a national covid-19 lockdown, which hindered farmers’ ability to offload stock.

The unique severity of last year has kept weather concerns front-of-mind this summer. These concerns were somewhat alleviated by good rainfall over the festive period, which had farmers in both islands feeling confident, and some even thinking they had offloaded prematurely ahead of Christmas. However, some very hot, windy days were to follow and both islands looked decidedly drier.

Destocking measures ahead of Christmas led to a soft supply of cattle to the store market throughout January. This trend has shifted through February, and based on yard data tracked by AgriHQ, 2600 more cattle have moved through the yards so far this month compared to the same period last year.

Elevated selling activity is an encouraging sign of a stronger market. Evidently, the market is more competitive than it was this time last year, when R2 steer prices were rapidly decreasing. This week, North Island R2 steer prices were 10c/kg above 2020 prices and have been steady, while South Island prices are still depressed. Overall, the cattle store market is by no means booming, and demand has been capped by low feed levels in key buying patches such as Hawke’s Bay and lower than normal farm gate prices.

A quiet store market, dry pastures and rising covid-19 alert levels may be giving some farmers a sickening sense of déjà vu. Although, weather conditions have turned a corner, with rain falling in drier areas of the North Island. Gisborne, eastern Hawke’s Bay, Bay of Plenty and Northland all had some significant precipitation, recording 40-150mm. Unfortunately, King Country, Waikato and the east coast of the South Island appear to have missed out on heavier falls.

Increased rainfall and cooler temperatures across the country have created a definite autumnal feeling. According to RuralWeather’s Philip Duncan “an autumn weather pattern is slowly developing”. NIWA data supports this, with indications of cooler soil temperatures year-on-year.

So, will recent rain and an autumn feel take the edge off drought anxiety? We still have two more weeks of summer to get through and as Duncan pointed out, rain now is more of a silver lining rather than a silver bullet. La Nina does improve the outlook for subtropical rainmakers in March but according to Duncan, this is reliant on elevated high pressure abating.   

Overall, farmers are in a better position than they were this time last year. A precautious approach to summer this year means farmers are prepared with supplementary feed and have been critical with stock numbers to lessen pressure on water and feed resources. Anyone looking to increase cashflow can offload cattle on a more receptive market, and buyers in western regions still have grass to burn. As with everything, covid-19 developments will impact the market this year, but a more temperate summer removes one hurdle from the track.

Sarah Friel