Thursday, March 28, 2024

Lamb prices too high

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Winter lamb contracts are coming into play and at close to $8 a kilogram are boosting confidence for a repeat of last winter’s buoyant prices. Winter contracts at $7.90/kg and spring contracts between $7.40 and $7.60/kg are surfacing in the South Island but the larger processors are yet to come to the table in the North Island.
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However, Anzco livestock head Shannon Parnham advises caution on the $7.90.

“At $7.90 there’s going to be a problem, it’s far too high and the end point won’t be palatable,” Parnham said.

“We will be nowhere near that. 

“We will be more realistic of the market signals with start of winter contracts at $7.20-$7.30/kg.”

He acknowledged contracts will fluctuate in line with demand for supply at specific times.

“It may get to $8 at some stage where there’s a real hole, more so at the end of the season as we swap old lambs for new season lambs.

“Otherwise, we’ll be looking at getting down to $7.10-$7.20 mid November and $6.70-$6.90 about Christmas time.

“Realistically, that’s where we would hope to be.”

Parnham said the last thing the industry needs is a repeat of last winter’s peak prices.

“We don’t want a repeat that prices lamb off the restaurant dinner table and has end-users baulking as they were last year.” 

Given the dry in the central North Island and the competition going on for land Parnham predicts a real fight erupting in North Island lamb procurement.

“It’s a bit more measured in the South Island but lambs will be scarce up north and that will tell in the pricing and while traditionally the South is behind the North the differential could well be much greater looking at the signals this year.”

From mid February to Easter there were about 300,000 lambs a week killed. 

That is well above last year’s levels with AgriHQ Livestock Insight analysts reporting the season to April 13 lamb kill just 1% behind the same time last year. 

The kill has eased over the past three weeks, which is evident in the increasing competition to procure lambs, they said. 

Canterbury cropping farmers continue to demand store lambs with the lifting lamb schedules helping that market.

The farmgate lamb price in the South Island has lifted to $6.90-$7/kg, and the expectation is for it to lift more yet. 

In the North Island the supply of hill-country lambs is coming to an end and the lambs on the cropping farms are not yet big enough to kill, forcing processors to scratch around to procure lambs. 

The average lamb price in the North is sitting in the $7.30 to $7.40/kg range. 

AgriHQ Livestock Insight reports international markets still showing strong demand for lamb in the wake of Easter.

Indications of strong consumption over Easter mean very little of the Easter chilled product has been diverted to the frozen inventory and buyers are continuing to make orders. 

On the whole, processor lamb margins are looking good and international prices are showing upward potential. 

This coupled with a potentially short supply could translate into further upside in farmgate operating prices, Agri HQ analysts said.

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