Overview of the Lamb Market
The lamb market has experienced a notable start to the new season, influenced significantly by weather conditions. In the North Island, adverse weather has slowed the supply of lambs to processors, leading to lower-than-expected slaughter rates and a consequent easing of downward pressure on prices.
Conversely, the South Island has seen a more typical flow of lambs to processing plants, resulting in a more pronounced decrease in farmgate returns over the past two weeks.
Current Pricing Trends
The AgriHQ lamb indicator this week stands at $6.15-$6.20/kg, a decrease from last year’s $7.45-$7.65/kg. This drop is less steep compared to last year when export demand sharply declined, causing farmgate prices to fall by over $2/kg from early October to Christmas.
Despite a smaller decline of 90c/kg this year, the impact is significant, starting from a lower base price.
Store Lamb Prices
Store lamb prices are currently at their lowest for December since 2017. Unlike 2017, when a hot, dry summer led to a surplus of lambs and plummeting prices, the current decline is more gradual and driven by weaker export markets.
Presently, 28kg lambs are averaging $74 and $76 in the North and South Islands, respectively, compared to $87 and $91 a year ago. This represents a $13-15 decrease from last year’s prices.
Market Strategies and Forecasts
The lower entry price for lambs has encouraged some farmers to invest in store lambs for early summer trade, with a focus on lambs closer to 30kgLW.
The goal is to increase weights for a better return, as seen in the lacklustre performance of winter trade lambs earlier in the year. For a 28 kg lamb raised to a 20 kg CW, the estimated gross return is around $44/head before costs, based on AgriHQ’s December Livestock Outlook report.
Future Projections
The market is contemplating whether store lamb prices will drop further. Store prices often reflect slaughter prices, and with a forecasted decline in the latter, a further decrease in store lamb prices is likely. The five-year average suggests January store prices for 28kg lambs could be around $2.60 and $2.75/kg in the North and South Islands, respectively.
Comparing Current Trends to Previous Years
January 2023 contrasts with the same period last year, where an abundance of feed and insufficient livestock led to a rise in store lamb prices, despite stagnant slaughter prices. However, with a drier summer forecast, store prices are expected to align more closely with traditional trends.
Optimal Timing for Purchases
For those aiming to secure lambs at the lowest price, historical data from AgriHQ indicates that this should ideally be done before mid-February, as store prices tend to increase after this point.
