The speed of the market turnaround will have some questioning if this momentum can be sustained. At this point the positives outweigh the negatives, allowing sheep and beef farmers to plan and budget with confidence.
Global shipping disruptions, which are slowing the flow of New Zealand lamb and beef into export markets, are driving prices higher. This is creating urgency among importers to secure supplies before they tighten further. This elevated competition is welcomed following a subdued start to the year.
Meat companies appear confident these market conditions are set to continue, but less confident in the supply of livestock needed to maximise returns.
There are numerous winter-to-early spring lamb contracts in circulation, as meat companies scramble to secure numbers for the lean winter months. There have been fewer beef contracts tabled in comparison, however, the upwards pricing trends are the same, setting a benchmark for winter pricing expectations.
Since April, growing Chinese demand for NZ lamb has been the catalyst for other key markets to rally. The reopening of the foodservice sector in major markets has also underpinned a lift in demand for higher-end lamb cuts.
Initial data shows the average export values for lamb rebounded between March and April to over $10/kg. This trend is continuing through May as export prices push higher.
This stronger demand is occurring as lamb supplies seasonally ease.
National lamb slaughter rates bottom out at about 200,000 head per week in August. Mid-April slaughter rates were still holding well above 400,000 head per week, but processors have indicated a sudden slump in the lamb kill through May.
This shouldn’t come as a surprise based on the high slaughter rates through the first six months of this season.
This is a key reason why farm gate prices for lamb have surged beyond $7/kg in recent weeks. Further upside is merely a formality, which will continue through to spring.
Farm gate beef prices have been slow to react to stronger global market conditions, as they coincided with the peak autumn cow kill, which pressured space at processing plants.
As cow numbers button off into June, there will be plenty of room for beef prices to shift higher, thereby aligning closer to market conditions.
The US imported beef market has surged to near-record levels for this time of the year on the back of tight imported supplies. This trend doesn’t look like it will abate anytime soon, which provides some solid assurances for farmgate beef prices into spring.
Improved demand isn’t solely limited to the US, with key Asian markets also stepping up to the plate.
While NZ traverses peak beef kill now, by the end of June supplies will be much leaner.
Despite this, AgriHQ expects farm gate beef prices will continue to track higher through winter, but the real upside will develop into spring.
Global beef supplies have edged lower in recent months, providing plenty of opportunity for those markets with the ability to lift production to capitalise on the stronger prices.