New Zealand Lamb Prices Expected to Rise29 June 2014
Constrained supply, growing Asian demand and a pick-up in European demand are expected to lift prices, according to the latest Situation and Outlook for Primary Industries Report.
China is now New Zealand’s largest market for sheep meat.
Lamb production is expected to slowly increase over the outlook period. Assuming average climatic conditions, the sheep breeding flock will continue to decline but this will be offset by productivity improvements, including improvements in lambing percentages and carcass weights.
In the year to June 2014, lamb production in New Zealand is estimated to have fallen only slightly, due to higher carcass weights on good pasture offsetting lower stock numbers. Opening sheep numbers for the 2014 production year were down 2.6 percent following the 2013 drought. The number of lambs tailed in the spring of 2013 was also down (1.6 percent to an estimated 25.5 million head) due to drought decreasing the average condition of many ewes at mating time.
New Zealand lamb export value is estimated to have lifted 13.6 per cent in the year to June 2014 to a record NZ$2.57 billion. A recovery in demand from traditionally high-value European markets has complemented strong growth in the Chinese market for cheaper cuts, bringing about robust overall value for lamb.
There has been exceptional growth in exports to China.
Exports of lamb and mutton increased 76 per cent in the year ended June 2013.
Strong demand saw China absorb the increased supply of both lamb and mutton due to the 2013 drought. In addition, mutton that would previously have found its way to the European market appears to have been diverted into China. Exports to China tend to be lower-value cuts and mutton which are shipped in frozen form. Further growth in China and other Asian markets is expected but at a slower rate over the outlook period.
Exports to the European markets tend to be higher-value leg and middle cuts with a strong chilled component. New Zealand exerts its competitive advantage by delivering increased volumes during high-consumption periods such as Christmas and Easter, when local European production is at its low point, while also ensuring year-round supply.
Over the next 18 months, lamb export prices in British pounds (GBP) are forecast to improve due to global supply constraints, robust demand from China and an improvement in UK demand.
Constrained supply is expected from New Zealand, Australia and the UK. In Australia, breeding flock numbers fell three per cent in the year ending June 2014 due to drought while in the UK numbers have also contracted in recent years due to a combination of climatic factors and market conditions.
Further out, modest increases in global supply and growing demand are expected, particularly from China which will steadily increase prices.
Lamb exports from Australia are expected to recover, reaching 210 000 tonnes by 2018, but only modest gains are expected from New Zealand and the UK.
Total export value for lamb is forecast to continue to increase over the outlook period to reach NZ$3.45 billion by 2018.
Domestically, the average lamb schedule price for the year to June 2014 is estimated at 537 cents per kilogram, up 12.6 percent on the previous year. Over the outlook period, schedule prices are forecast to continue to improve due to higher international prices and an assumed weaker NZD against the GBP.
New Zealand wool production is expected to decline with a declining sheep flock, according to the Situation and Outlook for Primary Industries Report.
The declining sheep flock will see wool production continue to fall over the outlook period. This year to June 2014, wool export volumes are estimated to have declined by 7.1 percent to 117 000 tonnes following the 2013 drought.
China is set to remain the most important market for New Zealand’s wool exports, accounting for 56 per cent of exports in the year to June 2013. China consumes around half of its manufactured wool products and exports the remainder to developed markets such as Europe and the US. Economic recovery in these markets will strengthen demand for Chinese wool products.
However, competition from cheaper synthetic fibres and cotton will continue to constrain prices.
Over the next 18 months, a fall in wool exports from Australia, the largest wool exporter, due to drought will sustain prices.
Further out, prices are forecast to rise gradually due to improved demand and only marginal increases in production from Australia.
You can view the full report by clicking here.