Lamb volumes accepted for Alliance’s minimum price contracts have been scaled back because they were oversubscribed and international meat prices have eased, livestock and shareholder services manager Danny Hailes says.
Global demand for protein, primarily driven by China, which has lost half its pig population to African swine fever, is pushing up prices but there was a significant correction over Christmas.
Alliance’s minimum price lamb contract is set at $8.10/kg. Last week the South Island schedule was about $7.70/kg, AgriHQ analysts said.
Hailes would not release volumes saying they are commercially sensitive but a Southland farmer says contracts have been cut back to 75% of applications.
The contracts start at $8.10/kg and slide back to $7.95/kg by the end of February.
The farmer says scaling back contracted volumes is not unusual and the impact is softened by the fact schedule prices are still well ahead of last year.
“They are still pretty good but not as nice as they were last year.”
Meat exporters have responded to the sudden weakness in the Chinese market by cutting sheep meat and beef schedules by up 20%.
Hailes says Alliance’s lamb contracts are designed to protect farmers from downward price movements with the risk worn by the co-operative.
“From time to time applications for our minimum price contracts for lamb are over-subscribed and this is the case for our January-February contracts,” he says.
Farmers are being scaled back to similar lamb volumes to last year.
Beef + Lamb chief executive Rod Slater says domestic suppliers’ and small goods manufacturers’ margins have been squeezed by high global prices and demand but a saving grace is that sale volumes are being maintained.
Dunedin smallgoods manufacturer and retailer Fishers Meats closed this month as soaring global meat prices cut margins, making the firm unviable. All 13 staff have found other jobs.
An analysis by IBISWorld estimates over half China’s 410 million pigs have died or been culled because of the swine fever outbreak.
China accounts for close to half the world’s pig meat production and consumers have turned to beef and lamb as alternative sources of protein.
Europe is also battling swine fever and IBISWorld senior industry analyst, Matthew Reeves says while underpinning higher red meat prices, dwindling foreign swine herds have reduced import competition for NZ pig meat producers.
Imported pork accounted for 60% of consumption in 2018-19 but Reeves expects that to fall significantly.