Lamb price rollercoaster expected to stabilise

New Zealand’s largest meat processor Silver Fern Farms (SFF) expects the uncertainty over lamb prices after their fall should clear in the next six months.

Chief executive Keith Cooper said sheepmeat markets were still difficult and people were seeing consumer resistance to last year’s high prices, which had led to a price correction.

‘‘This is a bit of a correction creating some uncertainty, but I am confident we will get certainty in the medium term – over the next six months.’’

Cooper said lamb prices in the short term would likely settle at the farmgate price of around $6 a kilogram for an average 17.5kg lamb. European buyers, in particular, were keeping shorter inventories of sheepmeat and did not want to commit to orders and later see prices drop back.

‘‘They are buying short and it’s a bit of a challenge. That said, once we see some stability in prices I am confident normalised demand will return for sheepmeat.’’

Demand is expected to continue as people still need food and global supplies remained static at their best, with sheep flocks dwindling in many countries including New Zealand and Australia.

Lamb prices at the farmgate have dropped suddenly over the past few weeks from a record $8/kg for a 17.5kg lamb last October- November to around $6/kg. Farmers are concerned at the $2/kg difference, representing a loss in earnings of about $36 to $40 an animal.

The strong dollar, virtually at a high, was removing market and farmgate value from lamb and creating a tricky environment for exporting, complicated by difficult markets.

Cooper said lamb prices at about $6/kg were still better than a few years ago and represented a $100 lamb for farmers.

If the market stabilised that was actually quite a reasonable return for sheep farming, he said.

New Zealand’s largest meat company does not expect lamb demand to be overly influenced by the prospect of drought next summer in Britain as large parts of the country struggle with low groundwater levels.

Cooper last week resigned as a director of Beef + Lamb New Zealand a month short of his full term, after being frustrated about the industry good organisation’s commercial intrusion in the meat industry.

He said he disagreed with Beef + Lamb carrying out research with government funding from the Primary Growth Partnership project and the use of old Meat Board money, which had created an ‘‘almost 100 per cent noncommercial model’’.

Cooper felt a conflict of interest had been created as the subsidised programme was running against SFF’S Farm IQ model, which was receiving half of its funding from PGP support and the rest from the meat company.

Often the projects were covering the same ground.

He encouraged farmers paying levies to Beef + Lamb to look closely at the platform of director candidates in the organisation’s coming election. ‘‘I am trying to stimulate farmer debate around the election on what is the correct role of Beef + Lamb and the future focus on the best returns on investment of farmer levies.’’

SFF pays about $1 million in levies to the organisation and the company collects $12 million of levies a year.