AgriHQ data shows prices climbed as buyers returned.
The speed at which store lamb prices jumped has not been mirrored in the export market though.
Lamb slaughter prices have improved marginally in recent weeks, buoyed by the sudden drop in slaughter rates rather than any improvement overseas. Therefore, while lamb traders revert to their ususal strong, winter-buying tactics, export markets aren’t showing the usual strength that supports late-season schedules.
If anything, export prices have slipped further in recent weeks, tempered by weak food service demand.
As summer gets under way in our northern hemisphere markets interest might pick up but some exporters note there is still a long way to go for prices to return to what was seen last year. The exchange rate has been cushioning New Zealand’s position, too. However, an improvement in global economic optimism has pushed crossrates higher, reinforcing how volatile markets are.
At some point store lamb buyers will have to step back and accept global lamb demand is much weaker than in previous years. However, what’s been paid lately suggests many expect the lamb job to find its feet and finish winter on a strong note. Slaughter prices are yet to breach $7/kg. In June last year the average was $7.50-$7.75/kg across the country. Any typical upside in slaughter prices through winter will depend on an improvement in export values.
Many entering the store lamb market are assuming slaughter prices will push well beyond $8/kg, banking on tight slaughter rates over the rest of the season creating very strong procurement competition. However, the numbers don’t stack up.
On average slaughter prices lift 79c/kg between June and October. On that methodology they would struggle to reach $8/kg in either island by October. Last year had the strongest-ever June to October lift but it was still only 95c-$1.10/kg, again providing little support for the $8/kg assumption many are working on.
For processors to really push the boat on prices through late winter they need to be confident there has been a clear recovery in key export markets. The supply side of the equation is clear. There will be fewer lambs over the balance of the season and that will be replicated in Australia, too. However, it needs to be matched by a sharp turnaround in consumer demand for lamb. Only if that can be achieved will trading margins remain intact and we can be confident of a strong start to the new season.
