TL;DR: The ANZ report predicts low lamb returns due to mixed global prices and reduced demand, particularly in China, despite slight improvements in UK market conditions and lamb production.
Current Market Conditions
The latest ANZ Agri Focus report presents troubling news for sheep farmers, indicating that lamb returns are expected to stay low. Global market conditions remain mixed, with reasonable prices observed in European and US markets, yet lower value cuts are seeing a drop in prices.
Pricing and Market Variations
The report highlights:
–Racks: These are performing well, sold mainly in high-end restaurants across the US and Europe, standing above the five-year average.
– Leg Cuts: These are trading about 20% below the five-year average, partly offset by the low value of the NZD, with significant demand in the UK and other European markets.
– Forequarter Prices: These have seen a sharp decline, down by 40% in NZD terms from the average, mainly influenced by reduced demand in China.
Global Influences
China, a primary market for lower-value cuts like flaps and mutton, shows a shift as consumers there are choosing cheaper protein options or cutting down on protein intake altogether, significantly affecting demand.
Production and Sales Trends
In the UK, lamb production is slightly up from last year, and imports have also risen marginally. The increase in UK consumer demand is a positive signal, though it’s unlikely to counterbalance the demand weaknesses from China.
Regional Insights
– Lamb Carcass Slaughter: It’s running 4.5% ahead of last season in New Zealand from October to mid-March.
– Regional Performance:
- South Island: Advances with a 4.9% increase.
- North Island: Faces a 4.1% decline.
Lamb weights are better in the South Island, averaging 19.0kg this season, compared to 18.9kg in the North Island. However, the season’s challenges, including droughts and the impact of Cyclone Gabrielle, have affected the weights and processing times, especially in the North Island.
Market Adjustments
Despite stable but sufficient supply, procurement pressures have somewhat supported prices. However, it is anticipated that processors might reduce pricing efforts in the forthcoming months due to consistent supply levels.
In summary, while there are positive signs in certain markets like the UK, the overall forecast for lamb returns remains subdued due to mixed global market conditions and internal challenges.
