Time of pain for beef and sheep sectors

Meat and Wool New Zealand is still confident of better times for sheep and beef farmers in the next three years.

However, that is not as soon as some farmers might want.

The high dollar is hammering farmer returns and wiping out the modest increases they are getting for their lamb on international markets, Meat and Wool New Zealand chairman Mike Petersen said.

Lamb prices for this season (starting in October) were up 7.6 per cent on the same period last year but when the sales were converted back to New Zealand dollars the lamb price was down 0.3%, Meat and Wool New Zealand said in a mid-season update.

Similarly, beef prices in the United States were holding near historical highs but when converted to New Zealand dollars were down 10%.

Petersen said that came on the back of unsustainable returns last year. The high dollar was causing "immense pain" for sheep and beef farmers, he said.

While dairy prices had doubled in the last year and outrun the rise in the New Zealand dollar, that was far from the case for the sheep and beef sector.

"What the Reserve Bank needs to remember is that there are two economies at work in the farming sector," Petersen said.

The central bank's decisions on interest rates were important to the sheep and beef sector because of the influence of New Zealand interest rates on the currency.

But Petersen expects lamb prices to be boosted in the second half of the year by a shortage of lambs -- from the east coast drought and the conversion of sheep farms to dairying.

On the good news front, lamb skins prices had jumped 117% to $6.30 since February last year.

Meat and Wool New Zealand Economic Service director Rob Davison said a continuation of the high exchange rate of US77c to US79c would make for the third worst year in 50 years of forecasting.