Increased supplies of lamb and mutton exiting Australia continue to weigh heavily on New Zealand sheep meat returns.
The key reason is the pricing differential, with Australian product trading at a discount to NZ’s. The NZ average export value (AEV) for mutton came in at $6.11/kg in October. This was a rise from September but still well behind the five-year average of $7.55/kg. Australia’s AEV in September came in at NZ$5.67/kg, a drop from $8.67/kg year on year.
The mutton market has been as unappealing as lamb, due to much larger volumes trading on the global market. Despite this, cull ewes still need to be offloaded.
As spring lambs begin to come out in larger numbers, ewe processing space will tighten, and schedules will face further downward pressure.
The NZ sheepmeat market has been largely influenced by Australia this year, and this will continue for the foreseeable future.
Mutton export volumes from NZ totalled 87,700 tonnes for the 2022-23 season, down 5% from the five-year average. In contrast, record high volumes of mutton have been exported alongside increasing volumes of lamb from Australia.
From October 2022 to September 2023, Australia exported the highest volume of mutton in AgriHQ’s record for that period – 191,600t, nearly a 22% increase on the five-year average. October exports were the second largest volume this year at 20,100t and there is little slowdown expected through November and December as slaughter and exports typically maintain current levels before easing in the New Year.
While a hard and fast mutton slaughter might be reason to expect a drop in throughput in 2024, Meat and Livestock Australia is forecasting an even larger mutton kill in 2024 – 8.7 million, more than 2023 by 228,000.
By 2025 it is forecasting the mutton slaughter to reach 9.82 million. This is due to a successful flock rebuild, which has created the largest breeding ewe flock in Australia since 2007.
Currently NZ mutton schedules are averaging around mid-to-late $2/kg, but there is a wide variance depending on location, with some in the deep south of the country only offered early-$2/kg.
While mutton schedules tend to trough as supply increases at this time of the season, prices are now at historical lows.
At an average of 60kgLW, and at the current nationwide average mutton schedule of $2.80/kg, this equates to 43-53% of schedule – compared to the 2022-23 season, when ewes were trading at 36-39% of schedule.
Not surprisingly, given such a low mutton schedule, this suggests that prime ewes are at a premium. But this is procurement-driven as a wet spring has led to a slow start to the new season lamb kill.
Prime ewes values at the yards are averaging $88 in South Island and $72 in the North Island this month. Last season, some ewes were purchased and then sent out on grazing due to processing backlogs. However, it has been the opposite to date this season, with spaces to fill on chains so the bulk of ewes are heading straight to the processors, although that’s not going to last.
Currently, El Niño is delivering better than expected rainfall, providing some grace after initial fears that spring was going to be desperately dry, which has allowed farmers a bit more time to consider on-farm decisions.
Despite that, seasonal trends have shown us that regardless of the weather, lambs will come out in abundance in the next few months. Add in any feed pressures and it will cause an influx of ewes and lambs all at once.
Farmers tend to pay around $40 more for replacement ewes than what they have returned from their culls or sold as prime ewes. This would mean $120-$130 could be an entry point for 2-tooth ewes but this may be overambitious, given the market uncertainty and also the additional challenge of El Niño, should the weather pattern eventuate to a sudden dry spell in the New Year, increasing supply.
Comparing this with 2016 when mutton schedules and prime ewe returns were similar, early ewe fairs in the North Island sold 2-tooth ewes for $115-$125. Older ewes were sold around $105-$115.