Sheep numbers down but prices may go up

The ODT reports that 120 meat workers at PPCS’s Burnside works have been called to a meeting on Monday. The expectation is they’ll be told that the venison processing will move to the Finegand plant in South Otago. This follows  last Monday’s news that the company’s Oringi works will close. 

 

In between the two announcements was another from Mataura Valley, a new dairy company, saying it plans to build a $90 million milk drying plant near Gore. Reactions were mixed with a warning that too many companies competing for markets could lead to prices being under cut as they have been in the sheep industry.

 

However, farmers facing the expense of converting to dairying will be tempted by the fact they don’t have to buy shares as they do with Fonterra; and the increase in cow numbers is expected to continue. Around 100 Southland sheep and beef farms converted to dairying for the new season and a similar number is predicted to convert for the 2008-09 season.

 

The scale of conversion has altered the South Island landscape. Visitors used to marvel at the number of sheep, but while driving from North Otago to Balfour a couple of weeks ago what struck me was how few sheep I saw. My impression was confirmed by yesterday’s release of 2007 stock numbers from the Stats Department which explain why meat works are closing and milk plants are opening.

 

Last year’s drought and numerous dairy conversions have led to a 3% drop in sheep numbers from 39.6 million in 2002 to 38.5 million last year. North Island sheep numbers dropped 5%: from 19.5 million in June 2006 to 18.5 million last year – just 100,000 more than in 2002.

 

The South Island still has more sheep than the North, but the numbers have decreased more too: there were 19.9 million last year, 6% fewer than 2002. The decline was steepest in Canterbury where they dropped 8% to 7.2 million and Southland down 5% to 5.7 million.

 

Beef numbers dropped 2% from 4.5 million to 4.4 million in the five years to June 2007. At the same time dairy cows increased 31% in the South Island, from 1 million to 1.3 million with a small increase of just 22,000 to 2.9 million in the North Island.

 

The drop in sheep numbers signals there may well be hard times ahead for meat workers and their communities as over capacity forces PP and possibly other companies to “right-size”. But there are encouraging signs for meat producers. We’re not the only country with a decline in sheep numbers. The drought has taken its toll on flocks across the Tasman too so the supply is down while the world demand for protein is growing. Beef prices are already at record highs in the USA; and the falling dollar will also help boost prices, not just for meat. Pelts and wool have been at rock bottom levels so even a small lift in returns from them will help farmers’ incomes too.

 

 

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