Sunday, 06 September 2015 14:36

Lamb steady, beef booming

Written by 
Nathan Penny. Nathan Penny.

Beef and lamb exports paint two different pictures, according to the ASB’s Farmshed Economics report for August.

ASB rural economist Nathan Penny says the rise in lamb prices in August is normal for this quiet time of the season. And because the New Zealand dollar went largely sideways during the month, the lift is similar in NZD and foreign currency terms. 

“But putting aside seasonal factors and the earlier NZ dollar fall, nothing much is doing in lamb markets. The same recent drivers of the price weakness are still in play,” Penny adds. 

“Lamb supply, in particular, continues strong, pushing down prices. Strong domestic production in the key UK and Chinese markets has increased lamb (and sheep meat) supply. Supply has been similarly high here in NZ and in Australia. 

“All up, we expect underlying lamb prices (in foreign currency terms) to remain weak over the next few months, particularly relative to a year ago.” 

However, Penny says with further NZ dollar falls and the normal seasonal lift in prices may lead to a modest lift in farmgate prices. 

Meanwhile, the ASB says records continue to tumble for beef prices. 

“Over the July-August, the beef index has lifted a further 7%, setting fresh record highs. However, a potential price ceiling is emerging. It is likely that NZ will fill its US quota earlier this year, compared to last. This means average export prices may fall or plateau as meat companies are forced to divert beef to other lower-paying markets over coming months. 

But whether this will translate into lower farmgate prices is less clear.

“Some meat companies may still have their share of quota in hand. As a result, robust local competition for beef is likely to keep prices strong. Either way, beef prices are likely to stay high over the coming months, though the current stratospheric prices may give way to merely sky-high ones. With that in mind, the outlook for the beef sector remains very positive.”

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