This year can only be described as a whirlwind. Farmers experienced historical highs and lows within six months of each other. Ups and downs are frequent in the industry, but such extravagant changes will not be a ride most want to experience again.
War, flooding, droughts, covid restrictions, lumpy skin and foot and mouth disease threats were all experienced this year. Combined with rule and legislation changes, increased overheads and costs, staff shortages and backlogs, farmers’ resilience has been truly tested. The end of this year will come as a bit of a relief.
The first quarter of the year started off fairly positive for most. The outliers to this were Waikato and Southland, which were experiencing drought. This resulted in poor growing conditions for both lamb and cattle. But the wheels were generally intact and exporters were relishing the exceptionally strong prices. Omicron was also a culprit for backlogs arising in cattle processing. While Omicron was toying with supply chains and limiting processing capacity, the low volumes of lamb encouraged high export prices. In fact, February produced the highest average export value on record for lamb at $13.28/kg, with exporters at the time describing making sales as “child’s play”.
Coming into the second quarter, internationally, the US was in a drought and recorded the highest beef kill since 1990. While most global economies were re-opening, China was about to start the beginning of its year-long series of covid lockdowns. Despite increased beef supplies, overseas pricing remained steady and the NZD:USD was at its lowest point since 2020. This helped support some good export returns as hospitality sectors started increasing demand.
Come May, the industry was feeling positive. There was no change to beef, and winter contracts of lamb were talking as high as $10/kg. But there were signs from China that this might not be the way it stayed. In April China took only 35% of New Zealand lamb exports, the slowest it had been for 10 years. This was the first real sign that things could be about to turn.
From August onwards NZ experienced one of the longest and wettest ends to winter for several years. This flowed into spring and resulted in low and delayed growth rates in livestock. Export trade was showing signs of being overstocked and lamb in particular was at a low trading point. All the confidence that had been ignited was beginning to fade, despite slaughter prices still at historical highs of $9.00-$9.30/kg. Cattle farmers were taking less of a hit, though, as export prime and local trade was up to $7/kgCW.
From October onwards is where it got troublesome. European and Chinese lamb and mutton buyers stayed dead quiet after the winter lull due to a mixture of China’s lockdowns and inflation stalling consumer lamb buying. Before we knew it prices were in free-fall, and have been pulling schedules down swiftly since. Beef was more resilient, but that was partly due to the low exchange rate, which has since lifted. In saying this, lamb slaughter prices as of mid-December were only 15-20c/kg below the five-year average, and export prime 35c/kg higher.
So although the year is finishing on a gloomy note, overall pricing could definitely be worse. It’s been a huge year and uncertainty hangs over everybody, but the industry is resilient and has weathered similar storms before.
On behalf of AgriHQ, we want to thank you for your ongoing support and wish you a safe and happy festive season.
