Chinese New Year and Easter are looming as crucial milestones that will determine the fortunes of sheepmeat farmers for the remainder of the season.
Prime lamb prices are currently about $6/kg, up to $1/kg lower than the same time last year, and AgriHQ senior analyst Mel Croad said exporters will be closely monitoring how those two key retail events evolve.
Exporters are already saying lamb prices will ease after the Easter chilled production period, but to what extent depends on stock clearance during these events and whether consumer confidence subsequently recovers and translates to a recovery in demand.
Alliance chief executive Willie Wiese said there are signs the lamb market is improving, but it will be some months before that flows through to better farmgate prices.
Inventory clearance during December was high and there is optimism that demand will be strong over Chinese New Year and Easter.
Wiese acknowledged low market prices will be helping to fuel that demand and that rain in Australia has curbed the flow of lamb onto the market.
“There is some upside, it is just about timing,” he said.Listen to “News Wrap | Exporters hold breath as canal traffic slows” on Spreaker.
Attacks by Houthi rebels on ships accessing the Suez Canal from the Red Sea present a new challenge for exporters, with carriers carrying New Zealand freight adding an extra 12 days sailing as they divert around the Cape of Good Hope.
Croad described current lamb prices as steady to slightly lower than they were before Christmas and said exporters are hopeful of a post-Chinese New Year and Easter recovery in demand driven by growing consumer confidence and prices.
“At this point exporters are waiting to see how Chinese New Year goes and demand post the Easter chilled trade.”
Last year there was a jump in demand and prices after Chinese New Year as China emerged from covid lockdown, but that will not be a factor this year.
Croad said the industry needs a circuit breaker, something to break the cycle and boost the market at a time when the normal seasonal pattern is for prices to fall as production peaks.
“If we follow normal seasonal pricing trends through until June, there is nothing to get excited about,” she said.
North Island farmers have responded to low prices by keeping lambs longer to put on weight, with the total kill for the first 12 weeks of the season (up to December 23) nearly 190,000 below that of 2022.
That was the lowest start to a North Island processing season in nearly 30 years and is more than 300,000 below the five year average.
The South Island lamb flow has been the exact opposite.
For the same period, the kill was 132,000 higher than 2022 and 277,000 more than the five-year average.
Croad said a fear of dry conditions could have encouraged South Island farmers to quit their lambs early rather than retain and grow out to higher weights.
The slow North Island kill and plentiful rain in Australia curbing the flow of lambs there could emerge as factors later in the season as those lambs will have to be sold at some stage.
Croad said exporters have noticed less Australian lamb in the United States market in particular, although that hasn’t helped boost prices yet.