AgriHQ’s monthly Sheep and Beef report out yesterday shows the upswing in export volumes in November has not correlated into stronger prices, with markets now content with existing supply.
Beef and lamb exports from NZ increased in November – beef exports were up 25% on 2014 November volumes, and lamb left NZ shores more readily than usual (up 83% to the UK year-on-year). However in both cases prices were disappointing. November lamb prices were US$1.33/kg short of that achieved a year earlier, and the US dollar value of beef exports to the US fell 20% from November 2014.
Since then Chinese demand for lamb has not increased, as inventories remain close to full. The Chinese domestic slaughter, which makes up more than 90% of the product in the market, has been higher than normal. Demand for mutton has been just as poor as lamb.
Demand for chilled lamb for the European Easter trade has offered a slightly brighter note. Prices are expected to be in-line with what was being achieved last season, while reports indicate volumes may even be slightly stronger.
Meanwhile, a sharp drop in imported US beef prices in early mid-December set an unfavourable tone leading into Christmas. Imported 95CL bull lost 12c/lb over the space of a week to be trading at US$1.86/lb.
Prices in the three weeks since haven’t been nearly as volatile. “Though many will be glad the market hasn’t come back further, confidence is still low, with current prices being the lowest recorded since November 2011”, AgriHQ analyst Reece Brick said.
The sheer quantity of meat in circulation in the US is proving to be a barrier to improved market conditions. This is not only relevant to beef, but other proteins such as chicken and pork, which remain far more price competitive in the wider marketplace.
Brick said “there remains a large volume of beef which still needs to be shifted, meaning the priority for many buyers is to clear stock rather than buy significant volumes”.
Short term uncertainty is frustrating industry participants who are reluctant to forecast positive changes in market conditions.
Hopes of future improvements are increasingly dependent on the performance of other exporters. “There is an air of belief beginning to circulate that the market may recover, or at least bottom out in the coming months, due in part to the current situation in Australia where many plants have been either closed for extended periods as the number of cattle coming in for slaughter has been low.
"If the Australian kill tightens and exports slip further below last year’s levels, this should boost demand for NZ beef,” Brick said.
