NZ lamb prices itself out of UK market

Photo / Thinkstock

Sales of lamb in the British export market are on the slide as higher prices leave shoppers unable to afford the traditional Sunday roast.

Lamb sales in Britain are down nearly 20 per cent in the past year, the Daily Telegraph reported. Retail prices had risen more than 16 per cent due to a shortage of lamb and consumers were opting for cheaper meats, the report said.

Silver Fern Farms chief executive Keith Cooper said the meat processor had seen the data and it was "absolutely correct". It was evidence that lamb had been priced to a point where consumers could not afford to pay for it, Cooper said.

"Part of the cause of that is that New Zealand as an industry has continued to rely on the UK market for whole lamb leg sales and when prices go up and you're selling a 2kg lamb leg the unit price gets very expensive."

According to Statistics New Zealand, Britain was the biggest sheep and goat meat export market last year at $583.8 million - down 3.8 per cent on the previous year and 19.3 per cent lower than in 2009.

Cooper said the industry continued to rely Britain for lamb legs as opposed to diversifying away to other markets and packaging product in smaller, modern, consumer pack forms which were targeted at affluent shoppers.

"This is a phenomenon that happens about every three years and it goes away and it comes back. Everyone throws their arms up and it's because, strategically, the New Zealand meat industry hasn't got together to try to resolve the problem."

The farm gate lamb price had got too high at just under $8/kg and was now just under $6 - which had been an over-correction, Cooper said.

"Once we see demand stimulated in the market then I can see us incrementally improving the peak-season prices to farmers from these current levels." Inventory levels in the industry were above last year's, although they had been higher in previous years, Cooper said.

"Last year, we had to ration product; this year, we're having to work hard to keep markets wanting the product."

Cooper said the feeling in the industry was optimistic.

Beef and Lamb New Zealand economic service director Rob Davison said there was a lot of interest in the retail off-take during the Easter period given that economies in Europe were not strong and unemployment was reasonably high.

"All comments coming back is the price levels that are up there, there has been some consumer resistance so they just can't keep going on up and up."

The other side of the coin was the stronger exchange rate this year, which affected returns in New Zealand dollars.

The industry was awaiting, with interest, the export receipts from the March quarter, which were due out towards the end of the month.

Schedule prices for farmers normally dropped at this time of year, whereas last year was more of an exception in that it kept going up, Davison said.

"If we look at lamb prices at the farm they're still pretty good compared to where they were a few years ago."

Beef and Lamb New Zealand has forecast lamb prices for the season to be an average of $115 a head, down 2.2 per cent on last season's record high but more than double the level of about $54 reached in 2006-07.

"At these price levels what's being delivered, given the stronger exchange rate, is reasonably good," Davison said.

The European Union market accounted for about half of lamb exports and took some higher-value cuts, he said.

"The feeling at the moment in New Zealand is concern about the prices and the exchange rate ... but also there's less pressure there because it's been such a good growing season for pastoral farming."

The farming organisation's mid-season update forecast average sheep and beef farm profit before tax for 2011-12 at $133,800 a farm - up 17 per cent on last year and in inflation-adjusted terms the highest since 2001-02.