The hoped-for end-of-season bounce in prime lamb prices hasn’t happened due to soft export markets, and an analyst is warning that those conditions are unlikely to improve in the coming months.
AgriHQ forecast an average export lamb price for October of about $7.20/kg, but it has already peaked at $7.10/kg in the North Island and $7.05/kg in the South Island.
Mel Croad, a senior analyst with AgriHQ, said after a brief and modest recovery in export prices in August and September, they have since eased.
Part of the reason is an abundance of lambs, especially in the North Island. They are also heavier than usual as farmers have held onto them longer to try to hit the traditional late-season price lift to protect trading margins.
Croad said at these heavier weights, they are competing with Australian lamb in the United States market, yet French racks from lighter New Zealand lamb in the US command a $US1 to $US1.50/lb premium.
China will next month start buying lamb for the Chinese New Year celebrations in early February, but indications are that demand will be more subdued than usual.
“We have not seen strong, sustainable markets out of China this year,” she said.
Combining that softer demand with increasing volumes of new-season NZ lamb, continued high export volumes out of Australia and softer consumer demand in key markets due to high inflation, Croad said we are entering a lower price period.
“We have to do what we can on farm to mitigate that,” she said.
One bright spot is NZ prices are holding up stronger than those across the Tasman.
The Eastern States Young Cattle indicator price for yearling cattle a year ago was $AUS10.75/kgCW but is currently $AUS3.57/kgCW.
Over the same period the Eastern States Trade Lamb Indicator dropped from $AUS7.50/kgCW to $AUS4.30/kgCW and mutton $AUS5/kgCW to $AUS1.06/kgCW.
Australian sheepmeat exports are showing little sign of easing, with most destined for markets into which NZ also sells.
In the past two months they exported 63,000t of lamb. For the same period in 2018, exports totalled 33,000t.
Croad said Australian farmers have rebuilt flocks and herds but with El Niño looming and parts already starting to dry, they are destocking with most of that meat destined for markets like China at prices lower than NZ’s.
A market report from Silver Fern Farms says United Kingdom retailers have reduced orders for chilled lamb in favour of frozen to provide them with certainty in volume while allowing them to purchase when production is at its peak and prices may be at seasonal lows.
Demand from the Middle East remains stable although pricing is under pressure from cheaper Australian product. NZ lamb is preferred but not at any cost.
Demand for mutton in China is constant and in line with availability but prices are declining.