Strong activity from China this month is a continuation of January buying patterns. The Chinese mutton market was a notable feature. With strong mutton prices in China, often on parity with lamb values, the rest of the mutton markets are not getting traction. In January, NZ exported 11,400 tonnes of mutton, 85% of which went to China, while market share for the Middle East, the rest of Asia and Europe diminished. However, UK buyers were prepared to compete for mutton and UK imports grew by 61t month-to-month to 300t due to strong take-away consumption, and US volumes were steady at 225t.
While mutton is in strong demand, mutton supply has been patchy, as usual.
Production took a backstep over December and the start of January to prioritise chilled lamb for the Christmas and Easter markets. Building ewe slaughter rates from mid-January have provided a good supply, but the mutton kill is beginning to take a backseat now as more lambs present at processors. With a diminishing ewe flock and a ewe slaughter that is currently 25% ahead of last year for the season to date, the mutton supply is likely to hit the brakes soon.
Low production levels also capped January’s lamb exports somewhat.
North Island lamb slaughter was reduced by 8% from December 3 to January 14, while South Island production dipped from the end of December to mid-January. This contributed to January lamb exports only totalling 22,300t, a reduction from both December’s volume (22,600t) and year-ago levels (26,800t).
Despite low January export volumes, both China and the US imports increased compared to year-ago levels, with a lack of competing supply from our main competitor, Australia, boosting the market share of NZ lamb.
In contrast to the sheep meat volumes, beef volumes surpassed the five-year average export volume for January, which reflects strong prime slaughter rates this season. However, getting beef into the Chinese markets is not as easy as it once was, especially when we compare today’s situation with the insatiable demand for NZ beef that took place during China’s protein supply issues through 2018-19.
An increasing supply of competing South American beef exports to the Chinese markets is an issue. Year-on-year, Brazil and Uruguay’s January beef exports to China have grown by 15,500t.
On a positive note, a lack of competing supply of grass-fed lean beef from Australia is holding up the US manufacturing beef market and US imports were steady on December’s levels. These could be set to build momentum due to Australia sustaining a slow cattle kill.
Overall, January’s market activity was very positive, especially considering key markets and domestic production had to build from a slow start due to Christmas break. With China and America showing steady demand and global vaccine roll-outs underway, there are no imminent trade threats apparent.
