After a very disruptive April in terms of processing, May export volumes redeemed themselves.
Some of this will include product that was destined for processing and exporting in April.
But it’s heartening to note that even though New Zealand pushed more lamb and beef into export markets, there hasn’t been a wave of negative reaction.
Lamb exports reached a 13-month high last month of 32,000t.
This should have been a good test of market robustness.
While export values for May won’t be released for another couple of weeks, there is a sense that we traversed the month relatively unscathed. Supporting this is the fact that we really haven’t tested market strength for many months, therefore markets are still hungry for our product.
Processing disruptions that have spanned most of this year, mixed with a slow start to the season, has meant exporters have basically drip-fed supplies into key export markets.
Fortunately, our tighter supplies haven’t been dwarfed by surging supplies from competing markets.
Australia, our largest competitor, has faced very similar processing and export conditions as us.
The export data also shows NZ’s reliance on China for lamb has slipped this season.
Lamb exports to China have fallen by close to 40,000t.
Some of this is connected to lower overall export volumes, but China’s market share of NZ lamb has slipped from 51% last season to 39% for this season to date.
Interestingly, monthly export volumes there have failed to push past 11,000t per month.
Last year monthly volumes to China peaked at 24,000t.
Key indicator prices for lamb flaps into China have also eased.
For the past six weeks, prices have fallen behind what could be achieved last year by as much as 40c/kg.
It’s safe to say that Chinese lockdowns have negatively impacted pricing and demand for our lamb cuts.
Dining out restrictions, but also the arrival of summer, has also temporarily dented interest in lamb.
Fortunately our more traditional markets have picked up the slack both in terms of volumes demanded and prices.
Based on volumes exported, the US, UK, Germany and Netherlands have all increased their market share of NZ lamb this season.
While some heat has seasonally come out of UK and European markets in recent weeks, the US market remains robust with key indicator prices lifting to record levels.
From here, lamb export volumes start to seasonally decline, bottoming out in August before the spring processing season gets underway.
Processors still have their work cut out to get through all the remaining winter trade lambs.
This means there is every chance NZ might have more lamb than usual to export over the next couple of months.
Growing global market volatility will create some headwinds which will place an even greater emphasis on balancing the supply of lamb exports into key markets without creating additional pressure on prices.
This article was written by AgriHQ analyst Mel Croad. Mel’s reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.