Cheaper lamb could be on the menu this Christmas if the export prices remain depressed. Photo / File
Cheaper lamb could be on the menu this Christmas if the export prices remain depressed. Photo / File
Kiwis wanting lamb on the table this Christmas could be in line for cheaper prices - but it’s a tougher situation for farmers, with increased supply from Australia continuing to depress world markets and pushing down how much they’re paid per kilo.
After several years of “benevolent” weather, which resultedin a significant increase in livestock numbers across the Tasman, Australia experienced dry conditions in the third quarter, resulting in farmers rapidly downsizing their herds and flock.
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 (ending September) which 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 is 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.
“The reason this is so bad for New Zealand farmers is that the softer conditions are combining with high on-farm costs and farmers’ 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.
The decline in prices in New Zealand, however, is a lot less than in Australia and what Australian processing companies are selling meat for in markets, as our processing companies have worked hard to hold their prices.
In some markets, New Zealand has been able to differentiate itself from Australian product.
“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 pre-order 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”.
Meat is New Zealand's second biggest export. Photo / NZ Herald
“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 with the change to the El Nino weather pattern, which usually brings warmer weather.
Meat & Livestock Australia (MLA) estimates that farmers started to downsize their flock 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 are to China.
New Zealand’s schedule prices have therefore been hit hard as Australia’s increased supply comes at the same time as China’s economy and red meat demand remains 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 have been holding up better but this has 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 per kgCW for sheep, 15 per cent and 45 per cent lower than the five-year 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 lamb crop 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 global beef market is 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 like the US and Canada have been experiencing drought for a while and their exports are down, and demand for imports is up.
Beef prices internationally have therefore held up relatively well and that is expected to continue, the report said.
Meat is New Zealand’s second biggest export after dairy.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
