With livestock trading in New Zealand taking its usual winter breather, now’s a good time to look beyond our shores and see if the grass really is greener for lamb markets.
The obvious starting point is Australia. It seems like it’s been all sunshine and rainbows for farmers there since the drought broke in early 2020, but in the past few weeks it’s been quite the opposite, both literally and figuratively.
Rain through the eastern states is usually welcome at the start of the year, but it’s quickly turned the other way.
Transport and processing operations have been semi-regularly affected by flooding, and colder temperatures and a lack of sun have impacted on livestock growth rates.
On the processing side of the market, Australia’s in a similar position to us.
Staff sickness and a large number of farmers holding onto lambs for longer have generated fresh backlogs.
The six-week lamb kill to July 8 was larger than six of the past seven years at 2.07 million head.
The supply glut has affected farmgate prices.
Farmers who sold prime lambs through the yards – which is much more common than in NZ – have watched prices fall to about AU$7.75/kgCW in the past month, at a time when the market is usually lifting.
That’s equivalent to NZ$8.55/kg or 55c/kg less than the average price NZ processors were paying last week. Only a year ago there was a 90c/kg premium in favour of the Australian market.
Energy shortages across the Tasman are translating into much higher power and gas bills for processors, too. One analyst estimated the energy cost to kill a lamb is AU$3-$6/head, based on current spot-market prices.
The new Australian Labor government has announced that it will phase out live exports, which are a major source of income for Western Australia, though this will only begin to come into effect sometime after an initial three-year term.
Since June last year 487,000 sheep were exported from Western Australia, primarily to the Middle East. This figure was 1.63 million-1.96 million head per year through 2012-2017.
In the UK, processors reported a noticeable lift in lamb production this autumn.
Through April and May an extra 16% lambs were processed. This was 274,000 more than in the corresponding period in 2021, though those figures were artificially lowered by a number of farmers having killed early to avoid a potential market crash related to Brexit.
This year’s kill isn’t much higher than the five-year average.
Unlike in Australia, markets have paid well for new season lambs, which have started coming onto the market in meaningful numbers since the start of June.
Prime lambs have averaged £3.04-£3.16/kgLW via the yards since mid-June, equivalent to NZ$6.14/kgLW last week over a sample of 125,000 lambs sold.
This is forecast to ease in the coming weeks as some of this pricing was supported by the Islamic holiday Eid-al-Adha.
One potential issue going forward is a reduction in UK consumer spending on meat, especially lamb.
Almost a quarter of UK consumers are reported to be deliberately reducing meat consumption or eliminating meat from their diet, with 35% of those consumers citing cost as the reason.
The amount of lamb sold through retailers was down 20% on last year in the 12 weeks to June 12, though admittedly lockdowns through 2020 and 2021 had artificially inflated the volume of lamb sold via retail channels.
This article was written by AgriHQ analyst Reece Brick. Reece’s reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.
