Lamb prices unexpectedly hold
Farmer gloom about low lamb prices seems to be lifting as meat company demand shows signs of turning around.
Over the last month tighter lamb supplies had generated better prices when they normally fell, said ASB rural economist Nathan Penny. In a scramble to fill Easter orders meat companies had bid higher prices, he said in a Farmshed Economics report. Instead of the usual February trend of decreasing prices, lamb lifted 10 cents a kilogram over the month.
Farmers seemed to be holding on to lambs to put more weight on them because of low prices, judging by low slaughter rates. Penny said lamb prices were expected to maintain their premiums over previous seasons with low slaughter rates continuing. ‘‘However, while we welcome better prices, we caution that increasing demand, particularly in lamb markets, is also necessary for the gains to be sustained over the remainder of the year.’’
Meat company Affco closed off a new contract on March 3 which was similar to Easter lamb contract prices. The company, owned by the Talley family, will pay signed up farmers $5.30/kg for supplying lambs from mid-march to the end of April.
Affco national livestock manager Tom Young said it was typical for lamb schedules to fall up to 20c/kg after Easter trade contracts as a result of fewer opportunities to sell into chilled markets. However, new markets and value-added opportunities had opened up the contracts for lamb suppliers, he said.
‘‘We’re getting better returns for lamb into some of our markets outside of Europe and Britain, with increasing trade in China and the Middle East, as well as new revenue streams from our new technology and value add products.’’
He said the company was well aware of the challenges facing the sheep sector and was pleased to provide positive news for farmers. ‘‘On top of much lower returns for wool, we have a sector which is also feeling the effects of Brexit, with subdued demand for lamb from Britain and the impact of a high NZ dollar against the sterling hitting returns.’’
Penny said a similar dynamic to lamb was playing out for beef prices. ‘‘Moreover, we expect the happy days to continue for a while longer. Indeed, the lack of supply both locally and from Australia continues to keep NZ beef prices high.’’ After a wet start the summer had delivered generally good growing conditions for key dairying regions. This has prompted a partial recovery in dairy production.