Lean Christmas in the lamb trade

By LIAM DANN primary industries editor

Lamb numbers are down, prices are up and production capacity is greater than ever.

Competition for this season's animals is expected to be tough.

Bad weather early in the season has caused a 30 per cent drop in pre-Christmas chilled lamb exports to Britain.

Losses were worst on the East Coast of the North Island where heavy rain killed thousands of lambs in August and September.

Numbers are also down in the South Island after late cold snaps in Otago.

The Meat and Wool Innovation Economic Service now predicts that good conditions in other parts of the country could result in total stock numbers bouncing back later in the season, but that will come too late for the high-value British Christmas market.

Places that traditionally provided the early supply had been hit hardest, said Federated Farmers Meat and Fibre chairman Ian Corney.

"They had terrible weather when they were lambing and they lost a lot of lambs but because of the weather after that, the lambs haven't grown."

The cold, wet season had prevented the lambs from gaining the weights needed for early slaughter, he said.

The last lamb season produced 33 million lambs. This season the numbers were more like 31.1 million, the service reported in October.

The drought conditions early in the year had caused stock to be culled and made the impact of the wet spring losses even worse.

Although fluctuations in numbers were normal, this season was the most difficult the industry had faced for five years, said service executive director Rob Davison.

He remained optimistic that the numbers across the whole season would balance out if there was good growth over the next few months.

Corney said the additional processing capacity around the North Island was another concern for the industry.

Southern processing giant Alliance opened its first North Island operation this season - an 800,000-capacity plant in Dannevirke. Ashburton company Canterbury Meat Packers is building a plant in Marton, north of Bulls, but that is not expected to be operational until the middle of next year.

In the short term, the increased competition for procurement could be good news for farmers, he said.

But in the long term, farmers were more interested in a stable, healthy industry.

"I think most farmers would like to see a good price for their lamb, this year, next year and the year after rather than those big price humps and hollows."

If prices spiked too high there was always the risk that lamb could price itself out of the market with some foreign buyers, said Corney.

That was a situation that the meat processors would have to monitor.

Hawkes Bay processor Richmond indicated in its annual report that the drop in sheep numbers coupled with the arrival of Alliance could affect its bottom line in the 2004 year.

Alliance chief operating officer Grant Cuff said the poor spring, coming just as the company opened the North Island plant, was an unfortunate coincidence.

But Dannevirke would not have an enormous impact on the North Island market, he said.

"We see our requirements as modest ... The other companies may see that differently."

The plant was relatively small and would not reach capacity this season.

"We will start slowly. We intend being responsible," he said. "We're not there with any intent to make it difficult for any other company. We're there because we do need a few more animals."

The supply of chilled lamb into Britain would be tighter than usual this year.

There was a chance for some recovery in numbers, depending on the weather from now on.

"We've missed Christmas, whatever happens. That bit doesn't bounce back," he said. "So all we've done is delay product from a part of the year when prices are very good to a part of year when prices are not quite so good."

With the pre-Christmas chilled processing now over, prices are coming back 10-20c/kg in both islands, as schedules become more aligned to the normal frozen trade prices.

About 30 per cent fewer lambs than normal were exported chilled over the past four weeks.

Davison said that luckily, the long-term outlook for the market was relatively stable.

International prices remained strong and the biggest concern hanging over the industry was still the soaring exchange rate.