Farming sheep definitely has a future but it will require a substantial lift in prices and a recovery in crossbred wool return to be economically sustainable, say farmers and sector leaders.
Those spoken to urge sheep farmers to stay positive and to plan for the long term, though exporters think it could be late this year or early next before lamb prices recover.
Prospects for a significant turnaround in wool are less obvious.
Farmers are looking at their options as they respond to falling lamb prices, with
Hawke’s Bay ram breeder Matt Holden saying some clients plan to cut sheep numbers by 5-10% and run more cattle.
Beef + Lamb NZ (BLNZ) is forecasting farm profits will halve this year, following a 29% drop in 2022-23, squeezed between low returns and high input costs.
The effect plunges sector profitability to levels last seen in the 1980s, forcing some farmers to seek off-farm work to stay afloat.
Leaders say this is driven by the persistent underperformance of crossbred wool but also weak demand for sheepmeat in China and competition from Australian lamb.
New Zealand lamb prices are currently 12% lower than last season and 13% below the five-year average, but, significantly, prices have not followed normal seasonal fluctuations, remaining relatively stable through the mid to late part of the season.
South Otago farmer Simon Davies is working off farm to pay for fertiliser and knows of other farming couples using alternative employment to stay afloat.
The lift in returns from sheep that farmers say is needed, suggests a tectonic shift from current levels.
South Canterbury sheep farmer David Irving believes store lamb breeders need to average $100/lamb and finishers $150/lamb.
Wairarapa ram breeder Derek Daniell said wool prices of $10-$15/kg are required, a level that would once again make sheep a dual-purpose animal and could increase gross income off hill country by between $250 and $500/ha.
Daniell said a development at Wool Source, a subsidiary of Wool Research Organisation of NZ, which deconstructs the fibre to create powder, pigments and particle products, has enormous potential.
The insoluble format retains wool’s characteristics of pollution control, oil, odour and moisture management and fire retardance and Daniell said may just provide the step change that wool and the sheep industry needs.
“I am confident something is going to emerge and be truly exciting,” he said.
BLNZ Farmer Council chair Paul Crick said it was just a year or so ago that sheepmeat prices were buoyant.
He is confident those days will return and said the sector needs to take a long-term view as he has from hearing accounts of farmers who survived the 1980s economic reforms.
“At times I think we are guilty of being short-sighted and focus on the here and now. It’s important we look ahead.”
His attention is on what he can do on his farm, and he is embarking on affordable projects that illustrate he is improving his business.
Meat companies are confident lamb prices will recover but say it will not happen immediately.
Affco chief executive Nigel Stevens said production volumes have levelled off after successive years of decline.
With the exception of China, most markets have relatively strong demand, although exporters face ceilings in the price people will pay.
“Unfortunately, we don’t see the current situation changing quickly, but fundamentally NZ lamb is a high-quality product, with a bright long-term future,” he said.
To achieve a substantial and sustainable lift in price, companies say lamb must be repositioned as a value-added product desired by affluent consumers prepared to pay premium prices.
Progressive Meats founder Craig Hickson said lamb is popular but relatively scarce, forgiving and easy to cook and, in the case of French racks, offers restaurant presentation opportunities.
To connect exporters with consumers will take time and money, he said.
Other value-adding opportunities cited by meat companies are creating new high-value uses from currently low-value fifth quarter products.
Sheep numbers have fallen every year since 1982.
In 1999 there were 45.6 million sheep but this had declined to 25.3 million by 2022.
A BLNZ-commissioned study found 175,000 hectares of livestock farmland was sold for forestry and carbon farming between 2017 and 2022.
BLNZ chair Kate Acland said the reasons for the decline in stock numbers and farmers selling to forestry are complex and particular to each farming family.
She acknowledged that times are tough, describing conditions today as a perfect storm, but is confident sheep will continue to play a central role in mixed farming systems.
“Overall, sheep and beef farms are complex businesses, balancing multiple revenue streams of wool, lamb, beef, arable crops, deer and other activities from grazing dairy replacement animals to honey harvesting.
“Farmers are used to farming through commodity cycles and balancing returns from different revenue streams,” she said.
