Lamb’s heyday on the export market is rather abruptly coming to an end, at least for the next little while.
Selling lamb overseas was child’s play through the first half of the 2021-22 season. Average export prices exceeded all-time record levels in three of the four months between December and March (Hakihea a Poutū-te-rangi), maxing out at $13.60/kg in the latter.
Unlike similar years, it wasn’t the “China factor” driving prices, but more the traditional markets of Europe and the United States.
Overseas buyers played it a little too safe at the start of the pandemic, clearing out inventories to the point where they were running thin on supplies for an extended period afterwards. This kept orders coming in quickly. Production and supply chain challenges were just as much of an issue here, too. At the same time, consumers were seeking out lamb (reme) more often due to a mixture of stimulus packages and more time spent at home, allowing roasts and similar meals to be cooked more frequently.
All these key drivers have since fallen by the wayside.
Inflation worldwide has consumers cutting back on spending, and since lamb is one of the more expensive meat options, its often dropped off the shopping list in place of cheaper options such as chicken or pork. Similarly, restaurants, especially those with more expensive menus, have noticed a decrease in foot traffic since the initial post-lockdown rush, reducing lamb consumption via this market.
A few other nuisances are at play too, including ongoing lockdowns through China, plus the hot and extended northern hemisphere summer – warm conditions tend to lead to less lamb consumed.
It’s been all upwards in terms of supplies, too. Both Australia and New Zealand have reported an especially long tail to the old season kill, offloading a whole lot of lamb onto the market at a time when there’s usually not much to shift. The amount of sheepmeat exported from the two countries in August was a record for the month going back to at least the early-2000s.
Given Australia has limited access to Europe and China, markets like the US have felt the brunt of their offloading. Several secondary markets such as Papua New Guinea and South Korea have also been leant on heavily by Australia, usually selling into these markets at discounted prices.
In other years, NZ meat companies may have been able to navigate this by storing product in NZ for longer, to simply wait out the market. But those tactics have been too dangerous when everyone’s preparing for a small mountain of old season lambs to flood processing plants in October.
So where to from here? Unfortunately, down is the only certain answer. There’s too much up in the air to say by how much. The exchange rate is helping to a point, but that is only really for product sold in US dollars. And even then, Chinese buyers are trying to get US dollar prices down as their own currency has weakened against US too. The one positive from all of this is that even as prices correct, they will likely land somewhere above historical levels.
This article was written by AgriHQ analyst Reece Brick. Reece’s reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.
