Thursday, March 28, 2024

Lamb prices too high?

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Store lamb buyers are being cautioned to temper the prices they pay because winter schedules will be well back on previous years.
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Sale yard conversations indicate some buyers expect September and October schedules will be similar to previous years at about $8/kg, AgriHQ senior analyst Mel Croad says.

Croad says she is not talking the market down but is urging buyers to consider export prices might not reach the heights of previous years.

“All we are saying is be careful.

“If you step out and pay big money you might not get the margin you think you are going to get given the fundamentals we see in the market right now.

“The market might well improve but at the moment in-market prices are softer than we have seen for a long time, which means they need to recover harder and faster than before to get close to supporting a plus $8/kg price.

“If lamb supplies for processing fall short in late winter then any procurement pressure that develops might not reflect market conditions and that will have implications for new season lamb pricing from November,”

Good quality store male lambs are making $115-$130 a head and good ewe lambs from $90-$115 a head.

Before lockdown comparable male lambs made $85 to $105 at $2.60 to $2.70/kg and ewes $70 to $85 at $2.50-$2.60/kg.

Average North Island slaughter prices this week were about $7/kg, 80c/kg lower than the same week last year, reflecting market uncertainty.

“The store lamb market has lifted a lot since March whereas we saw 50c/kg drop out of the slaughter price through April and have only just recovered that in the last week to see farmgate prices back to pre-lockdown levels.”

Croad believes pent up demand following the sale yards shut down distorted prices as have farmers in drought hit areas looking to restock after recent rain.

AgriHQ senior analyst Suz Bremner says the number of lambs sold through sale yards is greater than usual.

“What we are seeing more of are lambs that would typically be finished heading to the yards rather than the processors, largely because the weather conditions have meant the seller has not been able to finish them.”

Silver Fern Farms supply chain manager Dan Boulton says September and October prime lamb prices could be up to $7.50/kg but market volatility makes it too risky to operate above that.

“The range I am thinking is up to $7.50. Anything above that will be procurement led and not related to the market.”

Product is moving but lamb markets in the Middle East, European Union and United States are all sluggish and expected to remain volatile for some time.

And supply chain issues linked to China’s covid-19 outbreak are hampering meat distribution.

After initially beating the virus Chinese demand soared but that interest was relatively short-lived as consumer demand through hotels and restaurant has waned.

Anzco Foods supply chain manager Grant Bunting says it is not unusual for a disconnect between store and prime prices and while winter schedule prices could reach the high $7/kg, market volatility makes new-season forecasting difficult.

Anzco sales and marketing manager Rick Walker says market forecasting is challenging.

“This is one of the few times when I look three months out without any level of comfort about where things will be.”

Walker says lamb is selling well in North American retail markets, food service is slowly re-emerging in Europe and the Chinese government has signalled it wants secure food supplies.

Japan is one market offering some stability with strong retail and food service starting to open up.

Alliance sales manager Shane Kingston says exchange rate volatility is adding to market uncertainty.

“We anticipate the rate will fluctuate in the low to mid US60 cents, which we are comfortable with. However, we are also mindful the situation can change rapidly.”

RaboResearch animal protein analyst Blake Holgate says African swine fever continues to remain a dominant issue.

The disease is spreading slower than previously but Chinese government policies are encouraging the herd to rebuild.

“With rebuilding efforts reducing slaughter numbers we maintain our view that China’s 2020 pork production will drop a further 15% to 20% below the low level of production recorded in 2019.”

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