Anyone who’s farmed sheep for long enough will clearly remember the pinch point summer weather conditions would create at processors early each year. Weather patterns have knocked that trend on the head over the past couple of years, but it returned this year, minus the usual complaints about backlogs.
In the six weeks to late March, New Zealand processors made short work of 3.4 million lambs, reminiscent of earlier years when lamb numbers were plentiful. This was 700,000-800,000 more than same period in 2022 and 2023, when processors were plagued with staffing issues alongside favourable on-farm feed conditions.
April saw slaughter rates interrupted by public holidays, and while May throughput started trending lower, weekly kill rates still managed to hold above average.
Higher lamb production has led to higher exports. In the first five months of 2024, NZ shipped 157,000 tonnes – a return to more traditional volumes. Given the lower production between January and May in the past two years, this supersedes those years by 12,000-19,000t.
The increased availability of NZ lamb has been readily absorbed by willing markets, many of which had been in the shadow of China in recent years.
However, these higher volumes have moved at prices much lower than we have enjoyed in recent years. The flow-on of this is weaker farmgate returns, which continue to slink along below $7/kg.
As we have encouraged a greater uptake of lamb into our global markets, the next step needs to be rebuilding prices to a sustainable level. To drive the value of NZ lamb exports higher we need to play to our strengths and remind markets that it is quality then quantity that counts.
We still need to ensure our sheep industry maintains the scale needed to compete globally, but we also have to reposition ourselves as price setters, not takers.
What may come as a surprise is that China still remains our largest export market for lamb, even though shipments there have declined below five-year average levels. The need to remain visible and maintain relationships within the Chinese market is necessary. Export conditions there remain subdued with only a faint hint of light at the end of a very long tunnel. But as that light brightens, being at the front of the queue will be essential to ensure we capture any opportunities that may arise. Otherwise, we risk Australia nabbing that spot.
Recent reports from Meat & Livestock Australia suggest they believe they have the upper hand in the export scene in the months ahead based on their expectation that our production and export volumes are slumping, while theirs continue to break records.
There is some truth to that statement. NZ export lamb slaughter numbers for the 2023-24 season were expected to land just over 17 million head. Season to date, the national kill is sitting just over 15 million head. On this basis, it would leave a remaining lamb slaughter tally to September 30 well off the pace of anything we have seen in at least the past five years.
This would lead to a considerable reduction in export volumes through to spring. While markets are showing glimpses of positivity, a drop-off in our production to drive export prices is a temporary fix.
We have been in this space before, but it’s never coincided with record-breaking production out of Australia.
For the first five months of 2024, Australia exported 155,000t of lamb, a 40,000t hike from normal. With weekly lamb slaughter rates continuing to spike over 500,000 head, annual export volumes will hit another record in 2024 of well over 300,000t.
This puts Australia in a powerful position to consistently supply export markets at a price it can dictate.
This article was written by AgriHQ analyst Mel Croad. Mel reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.
