Lamb on the menu as prices face the chop

Meat glut may be good for shoppers, but farm profits under pressure

Kiwis wanting lamb on the table for Christmas could be in line for cheaper prices — but it’s a tougher situation for farmers as increased supply from Australia pushes down how much they get paid.

After several years of “benevolent” weather, resulting in a significant increase in livestock numbers across the Tasman, Australia had dry conditions in the third quarter, so farmers quickly cut animal numbers.

The result was a glut of Australian sheepmeat and beef in New Zealand’s key export markets in the second half of the 2022- 23 season ( which ended in September). That is expected to continue into the 2023- 24 season, Beef and Lamb NZ said in a report to farmers.

In the first 11 months of 2023, 7 per cent more Australian lambs and sheep and 16 per cent more cattle were processed than in 2022.

“The extra supply of lamb, mutton and beef has entered international trade when demand i s fragile and contributed to a decline in prices for prime livestock in New Zealand ( particularly lamb and sheep), which is unusual for this time of year because prices are usually higher,” Beef and Lamb said.

Mutton prices are now 45 per cent below the five- year average.

At the same time that prices are softer, farmers are facing higher costs. “Profits are forecast to average more than 60 per cent lower than two years ago with many farmers not expected to make a profit this year,” Beef and Lamb said.

“How long downward pressure on international markets will remain depends largely on the severity and length of the dry conditions/ drought in Australia, and how long it takes China’s economy ( and demand) to recover,” the report said.

“We should get a sense of the prospect of improvement in the China market in the next couple of weeks [ by the middle of December] as preorder sales start for Chinese New Year.”

Beef and Lamb NZ chief executive Kit Arkwright said that, ultimately, retailers would set the price, “so it will be up to them to determine pricing levels of lamb for shoppers over the Christmas- New Year period”.

“Factors will include freight costs, balancing the whole carcass, demand from shoppers and the price of other proteins,” Arkwright told the Herald.

“We encourage Kiwis to shop around as there will be sure to be some good deals out there this festive season.”

Australian weather forecasters are predicting a strong drought in Australia starting this summer.

Meat & Livestock Australia ( MLA) estimates that farmers started to downsize their flocks around September in anticipation of this.

Australia and New Zealand are the main exporters of sheepmeat and lamb globally and the two countries compete in most markets.

The increased supply from Australia has heavily affected sheepmeat and lamb markets.

Australian exports have increased most significantly into China and the Middle East.

Nearly 50 per cent of New Zealand’s total lamb exports go to China.

New Zealand’s prices have therefore been hit hard as Australia’s increased supply comes at the same time as China’s economy and red meat demand remain weak.

The next largest share of New Zealand’s lamb exports is to the European Union ( 15 per cent) and then a combination of “other” markets accounts for 14 per cent ( United States, Middle East and Britain).

Beef and Lamb said these markets had been holding up better but this had not been enough to offset the situation in China.

The latest BakerAg schedule prices for lamb in New Zealand are about $ 6.30 per kgCW ( carcass weight) for lamb and $ 2.60 for sheep, 15 per cent and 45 per cent lower than the fiveyear average for lamb and sheep respectively.

The increased supply from Australia is coinciding with solid export volumes from New Zealand and this is expected to continue due to a tally of

20.9 million lambs tailed in spring

2023, 2.6 per cent above last year. While New Zealand and Australia are large players in the global sheepmeat trade, the international beef market i s much bigger, with many more dynamics at play.

Therefore, changes in Australian supply have less impact. Australia is the second- largest beef exporter and its main markets are the US, China, Japan and South Korea.

While there has been an increase in the supply of beef from Australia, some other major producers such as the US and Canada have been experiencing drought and their exports are down, while demand for imports is up.

Beef prices internationally have therefore held up relatively well and that is expected to continue, the report said.

Meat i s New Zealand’s secondbiggest export after dairy.