Dry conditions in parts of the country means lambs are being killed at lighter weights. At the same time, farmers are receiving $50 less per head compared to last year.
Beef and Lamb New Zealand chairman Mike Petersen says farmers are being forced to offload stock at soft prices.
Hawke’s Bay, Wairarapa and parts of Canterbury are experiencing extreme dry conditions after missing out on spring rain.
The double whammy of low prices and poor weather comes after two very good years for New Zealand sheep farmers. Petersen says sheep farmers are in generally good shape financially, but they won’t be able to sustain lower prices for much longer.
“If lamb prices remain at this level, some sheep farmers will be looking to exit the industry,” he told Rural News.
The sheep industry’s woes stem from the financial crisis gripping Europe, New Zealand’s number one market for sheepmeat in volume and value. Softening EU markets have forced redirecting of lamb from those markets onto the strong Middle East market and other markets around the world, further eroding prices.
Petersen believes the level of volatility in pricing for lamb does not provide sufficient confidence for farmers to invest in the future of the industry.
“My pick is that we will see a further reduction in capital stock numbers and this puts added pressure on the procurement situation for future years.”
One of Australia’s largest exporters of lamb says with plenty of cheap product on the international market, producers can’t expect returns to increase for at least the next four to five months.
Western Australian Meat Marketing Co-operative Limited (WAMMCO) chief executive Coll MacRury says with consumers switching to cheaper sources of protein, an oversupply of lamb will be a problem.
“There’s plenty of product, cheap product on the market and you’re just hearing all the processors at the moment talking that way and the eastern states as well. New Zealand, who have another 2 million lambs to process this season, which is their big lamb kill, doesn’t commence until pretty much February and goes through until May and there’s going to be some pressure on there.
“For the next four to five months I’d have to say that the international market isn’t in a strong position at all. “
But Petersen says lamb exports out of New Zealand cannot be blamed for the low prices.
“We are still talking about our third lowest lamb export on record. It’s the subdued demand in Europe that is affecting prices.’
BLNZ has forecast a 2012-13 lamb export of 20.5 million, the third lowest on record. It has predicted $4.80/kg price for peak season lamb. Petersen says this is not enough for a viable sheep industry.
He says it’s hard to predict how lamb prices will fare over the coming months.
