Tuesday, March 19, 2024

Store lamb prices hit new high

Neal Wallace
Some lines of store lambs hit $200/head in sale yard auctions last week, which commentators believe could be on the back of an Affco winter lamb contract which peaks at $10/kg.
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The contract is limited to the North Island and is for supply in August and September, starting at $9.10/kg in mid-August and peaking in late September at $10/kg.

AgriHQ senior analyst Mel Croad says this year’s winter contracts have progressively increased from $7/kg to this new high, which has slowed the flow of lambs to processing plants as farmers try to take advantage.

“The taps have been turned off dramatically due to the contracts out there,” Croad said.

“It was only April-May that the farm gate price was under $7/kg, now they are averaging $8.30/kg in the North Island and $8.15 in the South Island.”

Affco has increased stakes with its latest contract.

It coincides with a flush of feed after widespread rain through parched North Island areas, prompting buyers to purchase lambs originally destined for processing but retained as store to supply late season contracts.

AgriHQ reports at least three pens at the Feilding store sale last week hit $200/head, while the 9000 lambs sold at Stortford Lodge last week averaged $5/kg and prices at Temuka were $40/head or $1.28/kg higher than the same time last year.

“Instead of filtering through to processing plants, they are being sold as stores to get the maximum return, which is turning the tap off the supply to processors,” she said.

Silver Fern Farms chief executive Simon Limmer says a rapid decline in the national lamb kill last month is creating challenges meeting year-round supply commitments and could lead to killing space issues later in the coming months.

“June statistics show that the national lamb kill is down 25% on last year, which puts the longevity of these important campaigns at risk,” Limmer said.

“If this hole is being created by lambs being held over for later supply, we would have some concern around availability of processing space at that time, and lambs falling out of specification for key markets.”

Croad says this season differs to 2019 when lamb prices hit $9/kg in November on the back of purchases by China, which faced an outbreak of African swine fever.

“Back then one market was driving it to secure protein for domestic consumption and it happened at a time of the year our own supply was ramping up so there was a short life-span because lamb started to flood processors,” she said.

Prices quickly fell as a result.

This year, Croad says prospects are for lamb supplies to stay tight into September with strong demand in China, the UK, Europe and the US as foodservice reopens and the covid-19 vaccine is rolled out.

A backdrop to this is two months of high export volumes of lamb from Australia.

Its combined exports for May and June were 53,000 tonnes compared to a five-year average for that period of 45,000t.

Alliance Group livestock spokesperson Murray Behrent says global demand and pricing is expected to remain strong till at least the end of the calendar year, which means companies will have to offer competitive pricing.

“Pricing is being driven by a range of factors, including pressure on supply volumes and the covid-19 vaccines rollout, which is allowing countries to ease lockdown restrictions and reopen the important foodservice sector,” Behrent said.

“The global improvement in lamb pricing is continuing across our global markets, ahead of last year and is considerably ahead of the five-year average.”

Store lamb prices are reflective of the global supply and demand.

His confidence is tempered by possible volatility in global markets because of the pandemic, foreign exchange levels and the ongoing supply chain issues.

Limmer says global demand is driven by the recovery of foodservice and importers look to reintroduce lamb to menus.

“Our ability to supply product for the recommencement of restaurant trade is important to secure our space on menus, which are generally set six months in advance,” he said.

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