Friday, July 8, 2022

High inventories in Britain are affecting New Zealand lamb sales

High inventory and low sale levels for French racks and other middle carcase cuts are putting a dampener on an otherwise positive outlook for sheepmeat exports to Europe.

This is the view of Taylor Preston Ltd chief executive Simon Gatenby after his latest sales trip, which included the company exhibiting cuts at the Sial food show in Paris.

Middle cuts such as French racks and loins make up just 5% of a carcase but provide about 20% of the value, and until the inventories are used up and new buying starts there will continue to be a sentiment overhang in the market, Gatenby said.

Part of the problem is that the United States takes a significant volume of French racks, with large quantities bought at high prices last year.

The US market is slower than Europe at the moment and this malaise is contributing to further softening of prices in Europe.

"It could be three or four months before the US starts buying again, and starts shoring up the Europe market,'' Gatenby said.

"This gets you through to February or March, though there are still plenty of lambs to process after that.''

He said European demand for chilled leg cuts is good and demand for frozen product is recovering; and there is also positive sentiment round shoulder cuts and shanks.

The good interest shown by buyers at the Sial show had not yet converted into actual sales, but he expects this to come through in the next two to three weeks.

Everyone in the industry, on the livestock and market sides, was more realistic about pricing this year and a repeat of last year's volatility wasn't expected.

"Apart from the cloud over French racks, we're really happy with both mutton and lamb and demand for steers is positive as well.''

Wellington-based Taylor Preston focuses on the continental Europe market, more than the United Kingdom, but also pushed product into the more stable Middle East market last season.

A test for the New Zealand industry would be how it manages supply of high priced cuts into newer markets when the traditionally leading European market recovers over the next few years, Gatenby said.

The privately-owned company took the unusual step several weeks ago of telling its livestock suppliers that it would be profitable in its financial year.

This wasn't a signal that Taylor Preston was going to make its results public.

"There was some reasonably negative publicity about meat company results round that time and we just wanted to give our suppliers confidence that they were dealing with a steady and profitable company."

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