Normally local sheep and beef markets track in a relatively similar direction given a lot of key factors, such as the weather overlap for both industries.
However, in the past few weeks there’s been a clear and unusual divergence between the two.
Where this is especially noticeable is in the store markets.
Since the end of last month cattle prices have started shooting upwards in essentially all classes except yearling bulls, yet everything has remained strangely subdued around lambs, at a time when the market is often at its peak.
So why the split?
There are a few different factors at play, but the largest is differences at the processors.
By all metrics, there are a lot more old season lambs still on farm than usual.
This has snowballed into extended wait times to get lambs processed.
Lately this has deteriorated further as the peak bobby kill is taking space away from lambs, something that won’t be resolved until late-August/early-September depending on the Island.
Add in mediocre weather, which has slowed growth rates and made shearing a challenge, and you essentially have a bunch of potential store lamb buyers locked out of the market at a time when they would normally have been active.
In addition, there may not have been the buyers there in the first place.
Finishers are often reducing the number of trades made through winter.
Instead many are opting to hold lambs for longer, taking these to heavier carcase weights to make up any missing revenue.
For cattle, much of the above doesn’t apply.
Yes, there are some backlogs at processors, but these are smaller now the worst of the cow kill is in the past.
As well, those that have killed recently have found themselves making good margins, a chunk of which is usually reinvested into replacement cattle.
There’s a lot of extra restocking occurring in the Waikato, too.
The autumn drought forced many to offload but winter, while wet, has brought enough grass growth for farmers to begin buying in early.
Given this region is predominately cattle country, this scenario hasn’t had any noticeable influence on lamb demand.
Questions are being asked about how many store cattle there are out there, which could underpin the market.
Record numbers of cattle have been processed over this red meat season and the last.
In the two years in between there’s been drought through key cattle breeding country regions and plenty of stories of calf rearers either backing out all together or downsizing operations.
Not to mention forestry has continued to invade breeding country too.
Store buying confidence often comes from short-term slaughter prices changes, and this favours cattle too.
While spot-market lamb prices have essentially hit a ceiling in the past few weeks, there’s no shortage of competition for cattle, especially from local trade.
The ratio of export prices to slaughter prices suggests there’s easily the potential for further big upwards swings in cattle schedules, assuming there’s not big spring kill to take the edge out of procurement competition.
This article was written by AgriHQ analyst Reece Brick. Reece’s reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.
