Tuesday 19th June 2018
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New Zealand sheep farmers, whose fortunes in recent years have been overshadowed by their dairy farmer colleagues, are having a strong season with lamb prices approaching record levels, according to AgriHQ's Monthly Sheep & Beef report for June.
"This season continues to move from strength-to-strength for sheep farmers, mainly due to the incredible heights slaughter prices are reaching," AgriHQ analyst Reece Brick said in his report. "Winter contracts within the North Island and lower supplies in the South Island have pulled lamb slaughter prices up by 30 cents/kg in both regions."
In the North Island, meat processors have lifted their lamb prices for six consecutive weeks, with offers of $7.55-$7.75/kg as of last week and contracts for July and August at $7.75-$7.90/kg. Spot market prices also approaching these levels. In the South Island higher slaughter volumes through April and early May had now slowed, giving prices a boost with offers of $7.40-$7.60/kg as of last week.
Brick said there is increasing confidence that farmers will be offered $8/kg for lamb late in the season, pushing into territory that's only ever been seen once before in October/November 2011 when North Island lamb prices peaked around $8.25/kg and the South Island got to $8/kg.
"The very strong export market is providing a solid base for slaughter pricing, but it is likely that competition between processors for numbers will be the icing on the cake that'd pull the market towards $8/kg," Brick said. "Slaughter prices usually peak around October/November, so if we hit $8/kg it'll likely be for a short period before new season lambs begin to be killed in any meaningful numbers."
Higher lamb slaughter prices have pulled store lamb values upwards, while record mutton slaughter prices are providing a good base for the early in-lamb ewe market, though most are selling for breeding purposes, he said.
New Zealand and Australia shipped massive volumes of lamb overseas the past four weeks, but all markets have managed to hold their own regardless, Brick said. In May, a combined 67,000 tonnes of lamb was exported from the two countries, more than any other month as far back as at least 2010, and 26 percent higher than May last year.
Out of this wave, it was China that saw the largest increase, taking 21,500 tonnes or 32 percent of exports across the two countries. This was 52 percent more than both last year and the five-year average. All other markets were up year-on-year too.
"Even with all this extra product around, worldwide lamb demand has stayed strong," Brick said. "Sentiment is still very positive throughout continental Europe, the US and China."
Meanwhile, the coarse crossbred wool market continued to lift incrementally through May and wool inventories from last season are slowly clearing, AgriHQ said.
"While wool prices have certainly seen some gains, they remain below most farmers expectations," AgriHQ said. "Shearing costs continue to largely outweigh returns, a scenario that will only be exacerbated as shearing wages are proposed to rise. Fortunately, sheep farmers are enjoying a stellar season for both sheepmeat farmgate returns and store stock."
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