While the weaker New Zealand dollar is playing a key role in keeping lamb prices up, a push-back is imminent.
“It remains to be seen whether we will see a gentle price reduction or something more substantial.
“There is some uncertainty with drought in Australia, Europe and the United Kingdom and trade tensions between the United States and China.
“We are keeping a close eye on our markets,” Stacy said.
The important Christmas chilled lamb processing programme begins on Monday (September 17) and runs to the first week of November.
“From that point we expect prices to soften to reflect the change in balance from chilled to frozen,” she said.
Alliance has released its spring-summer minimum price lamb contract that will run from November 12 to December 22.
It starts at $7.30/kg and winds back as supply increases.
Anzco agriculture and livestock manager Grant Bunting said the reality of a push-back should come as no surprise.
While lamb is not Anzco’s core business the company is somewhat compelled to follow the leaders.
“And we have been saying for some time now the benchmark being set by the lead lamb processors is unsustainable.
“Our producers have been saying that too.
“They are telling us they would rather have sustainable consistency at, say, the $7 mark rather than take the money and run.
“It’s all very well to acknowledge now that the kitchen is too hot. It’s a correction that should come with no real surprises.”
The inconsistency with the markets is a procurement issue, Bunting said.
“It’s competition for lambs that’s driven the price, not the market and until that’s addressed we’ll be the first to say it’s not sustainable.
“We are the accidental tourist taken along for the ride that’s being dictated by the country’s leading lamb processors.
“It would be fair to say everybody, including producers, is somewhat nervous,” Bunting said.
The latest AgriHQ Livestock Insight reports the big weekly price lifts are easing with processors signalling the brakes have to come on operating prices as the losses being incurred are too great.
While the general trend last week remained upward, the range in the South Island is more or less the same as the previous week at $8.20-$8.40/kg.
Lambs have grown quite well this winter and it looks like the odd finisher is pushing lambs out the door sooner than usual, AgriHQ analyst Rachel Agnew said.
But if the North Island market is any indication there’s still potential for quite a bit more cash to be put in the spot market.
“There’s already one processor which offered an $8.60-$8.70/kg contract to suppliers.
“Whether there’s the same appetite for competition in the South Island remains to be seen.”
Agnew said lamb prices in the last five years have tended to peak from mid-October to mid-November.
“While it’s possible there’s more lifts ahead one processor has taken money out of schedules for next week, citing market push-back.”
Very few ewes are being killed and that is mainly keeping prices on them steady.
“However, one company, which was leading the upper-end of the market, has taken a few cents off while they have the opportunity.
“With that said the sale yards are often the preferred avenue for these given the premiums that are being achieved,” Agnew said.
Many sheep farmers have begun asking questions about the sustainability of the high lamb prices.
Agnew said it might be interesting for farmers to read that sheep farmers in Australia, Britain and the United States are also experiencing record high lamb prices and asking similar questions around sustainability.
A recent report by Meat and Livestock Australia questioned whether the record lamb prices are in line with the global sheep market.
Its conclusions aligned with what NZ exporters are reporting.
Firstly, global supply is tight.
NZ production is at a seasonal low, Australia’s new season production is well delayed because of drought and Chinese sheep production is also low.
While scarce supply is underpinning high global prices it is noted the United Nations Food and Agriculture Organisation sheep meat index is surging above other proteins, increasing the risk of consumer resistance.
NZ exporters have already reported some signs of push-back in certain markets.
“It seems the NZ sheep meat market is very much in sync with other sheep producing nations,” Agnew said.
