NZ lamb prices may rise 10% next season on lower supply, Chinese demand: ASB

Tuesday 24th May 2016

New Zealand lamb prices, trading at a three-year low, may rise 10 percent next season, on lower supply and increased demand from China, ASB Bank says.

Lamb prices averaged just above $5 per kilogram between October and mid-May, the lowest level since the drought impacted 2012/13 season, as early lamb processing saw a large percentage of the meat sold into a weakening frozen export market, and as China and the UK processed more of their own flocks. ASB Bank expects prices to lift at least 50 cents a kilogram next season starting in October.

The first signs of a lift in lamb prices may have emerged, with prices spiking 4.5 percent in New Zealand dollar terms over a week, drawing level with the same time a year earlier, according to ASB's latest New Zealand Commodity Price Indices. An agreement with China to allow future trade in higher value New Zealand chilled meat exports, a slowdown in China's p;ace of slaughtering its own flock, and reduced supplies in New Zealand and Australia due to a lower sheep flock are all boosting sentiment, ASB says.

"I think that the combination should help lamb prices eclipse last season quite comfortably," said ASB rural economist Nathan Penny. "It’s potentially good news for sheep farmers and their cash flows over the season ahead. It gives them a little bit more confidence to make decisions on the basis of prices lifting higher than this season. The sector in general is a little bit downbeat on the basis of dairy struggles so it’s one counter to that low level of confidence."

New Zealand export lamb production is expected to fall 7.8 percent to 19.6 million head in the season ending Sept. 30, 2016, according to the mid-season update published by Beef + Lamb New Zealand Economic Service in March.

BusinessDesk.co.nz

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