A sudden, unexpected easing of global sheepmeat prices looks like reducing the usual premiums from winter lamb finishing this year.
Meat companies are warning that prices, especially in China, have weakened in the past week or so, and the recovery experienced in autumn has not kicked on.
AgriHQ senior analyst Mel Croad said flaps sold to China that made $US6/kg in January were averaging $US7.25 in April – but had fallen below $US7/kg by late May.
Similarly, forequarters increased from $US4.60/kg in January to $US5.10/kg in April but were closer to $US5/kg by late May.
The average value of export lamb in January was $10.73/kg and $11.03/kg in April. In April last year it was $12.40/kg.
Store lamb sales quoted in last week’s Farmers Weekly were from $90 to $156, prices that indicate buyers believe the winter market will behave as it previously has and stay elevated or lift to levels of last year – which Croad doubts will happen.
“We are not seeing that in overseas markets.”
She said an abundance of feed and processor premiums due to a shortage of lambs for processing are influencing current prices.
“The lift in slaughter prices lately is procurement driven with some exchange rate support,” she said.
“Processors are actively competing to secure what few lambs are on offer and in doing so are masking recent market weakness.”
While the northern hemisphere summer is traditionally quiet for sheepmeat sales, many Chinese consumers used their savings to survive the lockdown, which has lowered consumption rates and increased inventory levels.
Croad said China is still buying lamb, albeit at lower prices.
Shipping volumes to China hit 15,000t in March and 14,000t in April, which exceeded the previous highest monthly volume shipped so far this year of 11,000t.
“It was anticipated China would come flying out of the starting blocks when the covid restrictions were lifted and return to the hungry market it was, but that hasn’t happened.”
Croad said the United Kingdom has not been the powerhouse market it previously was, with just 17,000t shipped there in the first seven months of the season compared to 40,000t for the same period five years ago.
“Prices have been weaker and there is less reliance due to other markets performing better,” she said.
Silver Fern Farms (SFF) describes demand for sheepmeat as “limited or patchy”.
“This will have ramifications for our outlook for sheepmeat, and to a lesser extent, beef. Venison isn’t showing the same negativity as other proteins at this point,” the company says in a supplier’s newsletter
The company tempers expectations that prices will improve in the mid-term and advises caution with expected store and farmgate prices.
Unusually for this time of the year, SFF said sheepmeat inventory levels in China and Europe are high, accentuated in the UK by elevated supermarket prices causing consumers to switch to lower-value proteins.
High Australian and United States beef production is putting pressure on short-term prices and SFF does not expect a recovery in demand in China until later in the year.
It has greater confidence global beef prices will recover ahead of sheepmeat.
Alliance is also advising of a significant market correction in China for sheepmeat, with the expected post-covid recovery well behind expectations.
“China is also moving into the warmer months where consumption typically slows,” a supplier update notes.
Demand for lamb in Europe is steady, but lingering cold weather has delayed the grilling season, while North America remains firm for middle cuts, and legs and shoulder cuts are steady.
Improved demand out of the Middle East is providing alternative markets, Alliance advises.
The Chinese market for beef has also continued to ease in the last month, with negotiations showing prices are also easing.