Monday, February 26, 2024

Breather for NZ lamb as dams fill in Aus

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Good rainfall across country lifts pressure for sheep farmers both sides of the Tasman.
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The torrent of Australian sheepmeat that has been clogging global markets since the middle of last year has slowed to a dribble as widespread rain helps ease the drought that has been gripping much of the country.

Some areas of northern Australia buffeted by Cyclone Jasper in December received as much as 2m of rain in 48 hours.

That was preceded by good rain across much of the rest of the country.

Before the rain turned up there were reports of Australian farmers shooting ewes in their paddocks. Dry conditions meant processors were inundated with livestock and prices for ewes fell to a dollar a head as a result. 

Alliance Group chief executive Willie Wiese, who returned from Western Australia in late December, said farmgate prices are now off their lows as soil moisture levels are replenished and livestock flows to processors take a breather.

“Over the last four to five weeks prices have definitely been moving up.

“Lamb prices are up and mutton prices are A$2.50 [$2.69] per kilo, whereas at one point they were a dollar a head.

“It is all because of the changed weather conditions.”

The favorable turn in the weather will be a relief for exporters on this side of the Tasman grappling with the twin challenges of increased supply from their major global competitor and weak consumer demand in key markets such as China.

In October, Australian mutton exports to China were up 57% compared to the same month the previous year, while lamb was up 14%.

Wiese travelled to China at the end of November just as Australian exporters were beginning to pump the brakes.

He said a recovery in prices for exporters would not be immediate despite the slowdown in Australian production.

“There is still a lot of lower-priced inventory in the Chinese market.

“So it will probably be a lagged effect where that inventory will have to be cleared before the higher-priced inventory can move in.”

The glut in the Chinese market has clobbered returns in other markets, Wiese said.

“China really sets the global price.

“Everybody looks for other markets and they all take their product into those markets with lower pricing when China is down.”

A Sydney-based director for New Zealand meat trader Latitude Commodities Mike Cleary said there has been a complete turnaround in livestock markets. 

“Rain on the eastern seaboard started probably six weeks ago now.”

Most states have received significant rainfall, he said.

“And it has not just been coastal, which it often is.

“Prior to that it has been an extremely dry year.”

Cleary had heard accounts of some farmers in New South Wales readying themselves to take the unprecedented step of carting water to replenish storage dams that had run dry.

Now these dams are filling again and processors were having to pay up to secure livestock to keep their plants running. 

Farmers are now receiving A$7 per kg CWT for lambs, up from the low of A$4.50 to A$4.80 per kg at the end of October.

Cleary does not foresee lamb prices returning to the A$8-$9 per kg CWT attained between 2020 and the start of 2023, when strong export markets coupled with good rainfall combined to push up farmgate prices. 

“It is really not there at the moment in meat values across the globe.”

Wiese said slowing Australian production is a positive development for shaky global sheep meat markets. 

But the establishment of the El Niño weather pattern, forecast to bring hotter, drier conditions to much of Australia, means any reprieve could be short-lived. 

“The challenge of the Australian threat that we were all bracing for impact for as they were clearing capital stock is that El Niño will last a number of years.

“The weather relief now is almost delaying that clearance, which will eventually come.

“It might give us short-term price lifts once that inventory has cleared but the threat that they will eventually have to clear all residual capital stock remains.”

According to Meat and Livestock Australia, the forecast mutton kill for Australia in 2024 will be 10% to 15% behind this year’s.

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