She says pricing would typically strengthen further through to October with expectation that $9 or above will still be around in September but the drop from there on raises concern.
The latest contracts released from some processors look to settle at slightly above $7.50 pre-Christmas.
“In a normal season that may be acceptable, farmers are well versed that as the new season supply increases and our reliance on chilled exports reduces, prices at the farmgate seasonally ease towards Christmas.
“But with this season potentially reaching to the mid $9/kg that is a much bigger drop than usual at the farmgate.
“Fortunately, these new season contracts are minimum price contracts, and that’s good to see, but they will still drive pricing expectations.
While the new season contracts will still capture some old season lambs, the majority will be new season lambs offloading on a schedule that is potentially falling faster than it needs to based on the current export environment and that leans towards rewarding current winter finishers rather than the breeders, Croad said.
“I would like to think we have moved away from the boom-and-bust cycles, but these prices reflect a strong downslide, much greater than average, into the new season.”
She says with declining flock numbers, farmers need every incentive possible to keep breeding ewes.
“Prices mid to high $7 nearing Christmas is normally viewed as positive but from $9 plus, dropping to $7 – it’s hard for farmers to stomach.”
AgriHQ reports a slower than normal lamb kill, with the South Island at record lows and processors continuing to sweat about future supply.
“It’s possible farmers are holding back and waiting for the higher prices in September and that raises concern around pressure on space.”
In line with the soaring lamb prices, mutton has also taken a leap reaching $6.50/kg in both the North and South Island, compared to $4.55 in the south last year and $4.95 in the north.
The season’s national mutton kill is particularly alarming, given that lamb supply has already shrunk to uncomfortably low levels.
To date the mutton kill is 10% higher than last season and 5% above the five-year average.
“This big jump in farmgate mutton prices is driving more of the lower quality ewes into processing plants.
“Because of the lamb value, markets are prepared to step up and pay more for mutton as a substitute.”
Farmers have diverted ewes to the saleyards where traders are buying for prices getting close to $7kgCW.
While strong prices at the early in-lamb ewe fairs were encouraging, Croad reiterated the need to incentivise the breeders to get the balance right.
“We have got to have the ability to compete in the overseas markets and not be lost because of security of volume elsewhere,” she said.
