Friday, March 29, 2024

Positive outlook for lamb prices

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When the last boat for the Christmas trade leaves New Zealand’s shores lamb prices begin their traditional downward slide.
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However, it is not all doom and gloom for sheep farmers.

Lamb was looking good and positive, Silver Fern Farms (SFF) chief executive Keith Cooper said.

Farmers could look to better prices in the peak season, January to March, with a worst-case scenario of $5.30-$5.50 a kilogram, he said.

“The last of the Christmas vessels has gone and we are coming off the $6 mark now. That is the result of the sales mix changes that occur at this time of the season, with a decrease in the constant demand for chilled and returns more dependent on the frozen market.

SUCCESSFUL MOVE: A new lamb-supply offer by his Canterbury-based company made sure supplying clients have been given good market-related deals, Peter Walsh says.

“We see it tracking down to the $5.50 space post-Christmas.”

This season was a $1/kg improvement on last year and Cooper was confident it was the start of a rebuild of value over the next two seasons.

Demand for frozen cuts was looking firm into December and with a tightening of supply this season firmer pricing was being achieved, he said.

“We are still optimistic the consumers can pay a $6-$7 schedule as we rebuild value to that point.”

China was NZ’s largest market by volume and value for sheep meat now, with 30-40% of sheep meat heading to China, and the second-largest by value and volume of beef, he said.

 While the Chinese were not taking the premium end of lamb carcases they were taking secondary cuts and carcases cut into six pieces.

The inventory overhang had been fixed, with lamb prices poised to improve as reduced supply drove worldwide demand, he said.

“These two components have already seen a price rise for sheep meat around the world.

“It is our view that will continue to be the case as the international market comes to grips with the fact that NZ volumes will be lower because China is taking a big chunk of our production.”

The challenge would be ensuring demand did not send prices skyrocketing and blow the market, as the $8/kg did in 2011, he said.

Markets burnt then were starting to return from the northern hemisphere but they could be struggling to get supplies, given the demand from China.

“Our customers lost a lot of money in 2011-12. Now the product is back in the market and on the menus at realistic values that our customers can afford.

“We are right on cue but we won’t be able to supply these markets the volumes of the pre-price crash.”

A new lamb-supply offer by Canterbury-based Peter Walsh and Associates (PWA) has attracted 93 farmers.

PWA offered farmers advance payments of $8 a lamb a month, from the start of lambing through weaning, for a maximum four months.

The total $32 a lamb payment was aimed to help farmers with cashflow.

“We haven’t blown the market out of the water but we have certainly made sure our supplying clients have been given good market-related deals,” Walsh said.

“It has been successful. Farmers seem to be pretty happy and it hasn’t had the effect of creating a procurement war.

“It was an initiative we took on to see if we could consolidate reasonable numbers to get a performance premium for farmers.”

The PWA offer included an initial premium of 10c/kg above the ruling schedule of the day and guaranteed killing space at processing plants.

PWA had bank finance in place to cover the programme, which would take spring lambs through to March, Walsh said.

“We are still optimistic the consumers can pay a $6-$7 schedule as we rebuild value to that point.”

Keith Cooper

Silver Fern Farms

Cooper said procurement had always been competitive and despite forecasted lower lamb numbers he did not predict significant change.

“Procurement has always been highly competitive. Competition is nothing new and to be honest nobody knows what the real numbers (of lambs) out there are. Talk is 18.5-19 million.

“There has been no storm, good survival and there are some great stories out there so far this season.

“The meat companies know they have to make a margin but we are in a different demand environment now.”

Last week the North Island schedule was $6.20/kg, while in the South Island it was $6.

In the North Island good numbers of new season’s lambs were being offered in the store market, with limited numbers making it to auction in the South Island.

Store prices at the beginning of the season were up to $3.50/kg, but with greater numbers now the price range was settling more like $2.80-$3.20/kg.

Final export statistics for the 2012-13 year show NZ lamb exports reached 328,000 tonnes, up 17% on the previous year and the highest exported volume since 2007-08.

China has replaced the United Kingdom as the leading export destination, with 72% growth on last year.

While the UK has lost some market share to China it still takes 23% of exported volume.

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