Farmgate lamb prices have fallen in recent weeks and are now more than $1/kg below the same time last year.
The lower prices reflect weaker international prices from softer consumer sentiment, a build-up on inventory in key markets such as China, and competition from Australia.
The AgriHQ lamb indicator fell 15c/kg last week in the North Island to $7.55/kg, and 5c/kg in the South Island to $7.60/kg, with further downside expected this week.
A year ago the North Island indicator was $8.90/kg and the South Island $8.95/kg.
AgriHQ senior analyst Mel Croad said procurement premiums have masked falling export returns, but now all meat companies are adjusting their pricing to reflect market conditions.
“Companies have been wearing tight margins and are now adjusting farmgate prices as export prices are easing,” she said.
Lamb flaps are currently making between $US5.50 and $US5.80/kg in China. In April they were worth $US7.25/kg.
“We’re seeing it predominantly in China but it is rippling through most markets.”
Chilled lamb exports are still moving, albeit at small volumes with just 3000t a month currently being exported, and French rack prices in the United States are also proving to be an exception.
In the US French racks are still selling for about $US12/kg, similar values to last year.
Croad said NZ companies are selling product, but with consumer demand low, inventories building up and competition from Australia, those prices are lower than previously.
She said Australian lamb is especially prominent in United Kingdom and Chinese markets with total exports in May of 28,500t, the highest monthly total in four years.
“The concern is that Australia will not slow down so the usual late winter-spring build up in demand will be weaker because Australia is filling the gap.”
The weaker outlook has also impacted store prices, with South Island values easing 30c/kg in the past month and the North Island falling by up to 45c/kg, but that could also reflect the wet season.
Croad said bull and steer prices fell 5c/kg last week, driven by lower demand from the US and an earlier build-up of stocks and production coming out of NZ and Australia.