Export statistics show the average export value for lamb reached a record high of $11.13/kg in July and despite the Brexit chaos the market isn’t coming back – yet.
“I’m not so sure we will get the $9/kg lamb but with the way China is at the moment I can’t see a significant back-off unless something horrendous happens with Brexit,” AgriHQ analyst Nicola Dennis says.
“At the moment China is buying hand over hand and despite the Brexit turmoil this week prices are holding up.
“It’s reasonably quiet in all markets apart from China but the United Kingdom and European Union markets are typically quiet at this time of the season.
“What we are seeing, as a result of this latest Brexit turmoil, are shell-shocked traders.
“Nobody wants to lay a stake in the ground and pick how it will go.
“The UK has basically shut shop for this week with Brexit such a moving feast and developments this week have been significant,” Dennis said.
At this time of the year contracts for the upcoming Christmas chilled lamb period are under negotiation.
UK traders are understandably nervous about shipping that coincides with the Brexit deadline and with the UK government now stuck in inaction there is no clarity on whether New Zealand lamb will face tariff charges after the Brexit deadline.
That is setting the scene for a sticky UK market.
“Our contacts are still managing to secure chilled contracts for the UK but there is not a lot of growth in this market relative to the Chinese markets.
“Prices in the UK are still looking okay, just traders are not committing to anything.”
Processors are holding back a little on last year.
“Last year was a bit crazy with the level of procurement pressure. They were paying record high lamb prices.”
The peak this time last year reached (AgriHQ prices) $8.55/kg in the North Island and $8.30/kg in the South.
Latest prices in both the North and South Island are par with last year despite the stronger prices overseas, which means a catch-up for processors.
“We are approaching peak pricing now and how much it backs off will depend on whether anything horrendous happens with Brexit.
“And while we don’t expect to lose volume, because we don’t send big volumes to the UK, it will be the higher end market that will impact on the NZ farmgate price.”
Dennis said prices are predicted to plateau rather than have peaks and troughs with indicators pointing to an October price starting with $7.
The average lamb slaughter price lifted 10c/kg to $8.20/kg last week with the top end of the range now being seen more frequently.
Alliance set its minimum price contract for chilled lamb for the Christmas markets at $8.10/kg.
While a little down on last year chairman Murray Taggart said the company believes it’s a sensible level given the expected volatility in world markets.
Prices will be helped by the likely shortage of lamb supply in NZ with up to a million fewer lambs for export this year compared to last year.
“Farmers are also keeping more lambs for breeding given the current good times in the NZ sheep industry.”
Drought in Australia and the African swine fever impact on Chinese pork supply are also significant factors affecting the global pricing scene, Taggart said.
