A $100 lamb is in the probable category for farmers at some stage, after last year’s disappointing returns.
Prices fell far enough to interest the Chinese in a wide range of meat cuts, to the extent it became New Zealand’s biggest market by value and volume.
With supply much lower this season and the United Kingdom already starting price rises, and prices in the United States and Europe thought to have bottomed, the bigger exporters especially had to work out how much product they should commit to China, NZX Agrifax analyst Nick Handley said.
“You’re looking into the future. Then when we get it wrong every man and his dog comes after you with a noose.”
Meat company executive on price estimates
The other side of that equation was what the Chinese demand would be for the higher-end cuts if prices were significantly higher, he said.
Handley said bigger companies might not want to risk more than 25-30% of their output going to China, relying instead on a recovery in the traditional leading markets. Smaller companies would have more leverage to put more of their product in China.
Silver Fern Farms (SFF) was the only company so far to have given a public indication of where it thought lamb prices might sit this season.
The forecast was based on foreign exchange rates applying early this month, when the kiwi was about US$0.79. On Friday morning it was at 0.81. The forecast was also based on markets remaining stable at worst.
SFF expected a price before quality premiums of $5.30-$5.50 a kilogram during the peak of the season, rising to $6-$6.30/kg during the off-peak period next winter and spring.
This pointed to a 17.5kg lamb being in the $92.25-$96.25 range in the peak period, then up to $105-$110.25 off-peak.
Most companies weren’t keen to make a price estimate yet.
“You’re looking into the future,” one executive said. “Then when we get it wrong every man and his dog comes after you with a noose.”
Forecasts this season were like a crystal ball exercise, Handley said.
The export kill would be about 18.6 million lambs this season, down about two million on last season, he said.
Companies also went into last season with heavy inventory levels from 2011-12. Thanks to China, those inventories and last season’s kill had been cleared going into the new season.
That was a real tightening of supply, he said.
