Friday, March 29, 2024

Doubts persist on lamb numbers

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Uncertainty over the number of lambs remaining to be processed for export this season is a challenge to pricing expectations, GlobalHQ analyst Mel Croad says.
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The Affco Holdings contract at $9/kg for a specific August contract is creating expectations of similar gains into September and October but was caused by low processing numbers and it is a step too far to expect the strong market demand to sustain that price.

Beef + Lamb has reduced its estimate of export lamb numbers for this season by 900,000 to 19 million and by mid-June processing levels were down by 1.08m on last year. 

“There’s a gaping hole developed over the last six to eight weeks,” Croad said.

Estimates suggest 3.2m lambs remain to be processed.

However, a good number of lambs are sent in during October so miss out on the September 30 season survey and a lot of lambs are believed to have been sold more than once in the store market as rising prices presented farmers with the chance of good early margins on stock they had just bought. 

“It’s hard to see how many lambs are still on-farm,” Croad said.

Farmers start to offload lambs in September and if a $9/kg price is reached on expected higher volumes coming through it will be procurement driven, with the risk that involves when average export values have already risen so strongly. 

The North Island schedule is about $8/kg and Croad does not see downside from there but says pricing needs to be managed to avoid causing market resistance.

GlobalHQ analysts expect an $8.50/kg average for September.

Traders will want to maximise older season lamb values. Most of them need to be through processing by the time new season lamb supply starts in the second week of November.  

“We are comfortable with the outlook but are wary of procurement competition,” she said.

Beef prices have picked up strongly in recent weeks and Croad expects a schedule about $6/kg for prime beef in the North Island in October, compared to about $5.75/kg now. 

China is driving demand and importing increasing volumes of manufacturing beef from NZ. 

That is taking some supply away from the  traditional manufacturing beef market, the United States, even though its own demand remains strong and encouraging for prices.

B+LNZ expects total beef and veal exports worth $3.45 billion in the year ending September 30. 

It expects the average value to be $6900/tonne, down from $7124/tonne in the 2017-18 year.  

US beef production and exports are at record levels but B+LNZ says the expansion in the cow herd has started to slow and is expected to halt in 2020.

B+LNZ expects total export lamb receipts of $3.39b for the year to September 30, up from $3.35b last year. 

That is on an expected 4.4% fall in lamb numbers. Increased carcase weights offset some of the lower tally. The forecast value for lamb is $10,360/tonne.

Total mutton receipts are expected to be $692m, down nearly 9% on last year on volumes down 13.4%. 

The average value is expected to be up 5.3% to $6801/tonne, driven by limited supply from NZ and Australia. 

Sheep at June 30 last year provisionally totalled 27.25m, down 1% on June 2017,  mainly because of 3.6% fewer ewes after heavy culling encouraged by high mutton prices. Deep culling is not expected for the latest June year, with ewe numbers expected to be up 0.5%.  

June 2018 sheep numbers in the North Island were down 2.2% at 13.3m with the South Island marginally higher at just over 13.9m.

Total beef cattle at June 30, 2018, were provisionally 3.8m, a 5% increase from 2017. North Island numbers rose 2.5% to 2.64m and South Island numbers rose 11% to 1.16m.

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