At this time of the year attention turns to what is happening on-farm.
Most farmers are head-down-tail-up preparing for a few months of hard slog. A return to a good old-fashioned, traditional winter means, for some, the hard work has already started.
The busyness of on-farm work between now and spring means for many there is often little time to spend monitoring slaughter prices and trends.
Slaughter rates do quickly slip to winter low levels as processing plants close for planned maintenance or switch to processing bobby calves.
However, despite what processing data depicts, those who want to remain ahead of the game should really keep an eye on market drivers.
Beef slaughter tallies typically bottom out in the North Island through mid-August and about a month later in the South Island. Slaughter numbers basically halve between autumn and late winter to about 25,000-30,000 head.
Having sat at 400,000-500,000 head per week through autumn, the national lamb kill seasonally drops to about 200,000 per week through August.
Lower slaughter rates through this part of the season also account for falling export volumes.
This tends to show up quickly for lamb with August and September low-volume months.
For beef the slowdown in export volumes isn’t typically reached until October.
The reduced supplies onto the export market tend to reawaken export demand.
Typically average export values start to gather some momentum and that is reflected in firming farm gate slaughter prices.
The question this year is just how high slaughter prices will go.
If there was ever a season to keep an eye on pricing trends, this is probably the one.
Especially for those setting budgets about now.
Current farm gate prices have never been higher for this time of the year, but we are coming off the covid-induced bubble of demand and export markets are starting to revert to traditional trends.
Lamb prices bottomed out earlier in the year at levels well above $8/kg.
This is not bad, considering the low point in 2021 ranged from $6.50-$6.25/kg in the North and South Island respectively.
Lamb prices have since risen to over $9/kg.
AgriHQ’s Livestock Outlook report for July forecasts further upside.
But it comes with numerous conditions, some of which weren’t a factor this time last year. Remaining lamb supplies point to a much higher offload to October.
Factoring that in alongside softer export prices does increase volatility.
Australia is now bullishly indicating record lamb exports for 2022, with much of it earmarked for release into global markets between now and December.
This will coincide with higher NZ supplies, requiring solid export demand to ensure prices don’t topple over.
For beef, the outlook remains solid.
AgriHQ is forecasting further pricing upside to November, with prices set to taper off into December as finished supplies increase.
This outlook does hinge on some level of normality returning to export demand.
Key markets such as China and the US have been battling various headwinds this year. China’s lockdowns dented demand for beef.
Now as shipping starts to free up, it will allow a greater flow of beef there.
If trade with China can lift and be maintained it will take some of the reliance off the US market, effectively providing some competition.
The US still has a mountain of domestic beef to work through but, all going to plan, import demand is expected to lift later in the year, underpinning current pricing expectations.
This article was written by AgriHQ analyst Mel Croad. Mel’s reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.
