Thursday, August 18, 2022

Procurement pressure drives lamb returns

Neal Wallace

The winter prime lamb market appears to be returning to normal after a bullish ride last year, but there is uncertainty about the number of lambs still left to be killed.

Up to the week ending May 7 and based on earlier estimates, there are potentially 5.8 million lambs left to kill to September 30, compared with 4.2m last year, which was the lowest for five years.

Senior AgriHQ analyst Mel Croad says this current estimate is based on dated data.

As a percentage, 5.8m lambs still to process represents 32% of the estimated total kill compared with a five-year average of 26%. 

At the same time last year, the percentage was 23%.

Croad says global markets in the past month have started to ease, but over that same period farm gate prices have lifted 30-40c/kg.

This increase appears to be driven by procurement pressure.

“The lift in prices in the last three to four weeks is procurement driven and not reflective of the export markets which have softened.”

Croad says a favourable autumn over much of the country may have encouraged more farmers to carry store lambs for the winter market in the hope it replicates last season.

This is true in the South Island where summer dry conditions in Southland meant lambs that would have been slaughtered by now, were bought as stores by Canterbury cropping farmers for sale over autumn and winter.

The market last winter was exceptional with prices rising in May and not stopping. 

By October prices were $2/kg higher than May.

Croad says while she is not forecasting a collapse in prices, she notes there is more uncertainty this year than last.

While still historically high, international market prices have this year followed a traditional pattern of softening through late autumn.

There is uncertainty about the impact of lockdowns in major Chinese cities, the dollar has started to strengthen again and questions remain about just how many lambs are left to be processed.

“Everybody is searching for a bit of clarity,” says Croad.

“AgriHQ is forecasting lamb prices to lift to well above than $9/kg by spring but the jump between now and the end of the season is not going to be as big as last year.”

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