Good times return
Following several years of pain, farmers and growers are facing a decent upswing in commodity prices, say economists.
BNZ's latest Rural Wrap report shows lamb prices for mid-November 2023 tracking around 25% below 2022 levels.
Prices are expected to remain under downward pressure. Multiple factors are blamed for the below average results. In Australia, aggressive flock rebuilding efforts following previous La Nina weather conditions have led to the highest flock levels since 2007. Combined with below average rainfall, this has seen a more than 20% higher lamb slaughter rate in Q3 2023 compared to 2022 and an almost 35% higher adult slaughter rate.
Over recent months, Australian lamb export volumes have averaged around 18% higher than a year earlier. Aussie mutton export volumes are around 50% above that of a year ago. The significant increase in Australian export volumes has increased competition across many markets including the UK, especially following the AU-UK FTA that came into force earlier this year.
"We have previously discussed that NZ lamb prices tend to be lower during El Nino weather patterns," BNZ senior economist Doug Steel says. "This season is unfortunately shaping up in that direction; it all suggests headwinds to lamb prices will persist for some time.”
Meanwhile, key trading partners like China have seen economic growth slowdown. Sheepmeat exports to China in the year to October are down 12% to levels last seen in the 2018/19 season. However, BNZ stressed that disentangling the influence of competition on the supply side from genuine changes in overall market demand on export price and value was difficult. It says export lamb values having generally been holding up under the strain.
Steel explains that a recent lift in retail sales and evolving lamb demand in China will play an important role in determining price levels ahead, as current supply dynamics present a risk of lamb prices being lower, for longer, than some are forecasting.
He says that lower prices can introduce or reintroduce new customers to lamb products.
“While that channel will not be the catalyst for a turnaround in prices in the first instance, it can alter preferences that can have price benefits in the longer term. Let’s hope that something good can come out of the current weakness.”
The outlook for lamb prices remains cautious, with BNZ’s current season forecast seeing lamb prices 18% lower than the last season with an increasing risk that prices would dip below the $6/kg mark at some point during this season. This would be the lowest – on a dollar basis – since 2017 and the lowest since 2008 when adjusted for inflation.
Steel adds that it is worth noting that above normal supply stemming from identified weather patterns will eventually end, as has been the case in previous cycles.
“If it is a cycle we are in, and a lot of it looks that way, we can expect price improvement at some stage even if that looks some way off at this point.”
Irish meat processor Dawn Meats is set to acquire a 70% stake in Alliance Group, according to a report in The Irish Times.
New Zealand's red meat sector says the United States' decision to increase tariffs on New Zealand exports is disappointing.
Waikato-Bay of Plenty farmer Hugh Jackson recently secured this year’s FMG Young Farmer of the Year title in Invercargill.
From nitrogen limits to ecosystem restoration –farmers and catchment groups are leading a new wave of environmental care, says DairyNZ.
OPINION: The Government's decision to stop local authorities going ahead with reviews of district and regional plans makes sense for several reasons.
With June ending and following the most upbeat National Fieldays for several years, tractor dealers are reporting a lift in sales.
OPINION: Your old mate's ear has been chewed off recently by farmers voicing their displeasure with the National Party, particularly…
OPINION: Your old mate hears that at a recent China Business Summit, PM Christopher Luxon delivered a none-too-subtle "could try…