TL;DR:
- Lamb prices have seen a slight improvement due to a shortage of supply and increased demand from traditional markets, despite earlier predictions of a significant drop.
- Global lamb supplies continue to outpace demand, with Australia’s exports growing, but there’s potential for global demand to eventually outstrip supply, potentially improving prices.
- Economic conditions and consumer spending trends are crucial factors influencing the lamb market, with a slow recovery expected through 2024.
Earlier forecasts had predicted a significant drop in farmgate lamb prices to around mid-$5/kg by February. However, a fortunate turn of events occurred due to a shortage of lambs entering processing plants from late January to March, preventing this predicted drop. While the fall in AgriHQ’s lamb indicators to $5.80-$6.10/kg wasn’t celebrated, it was a relief compared to earlier expectations.
This shortage over the past six weeks has not only provided a base for lamb prices but has also been accompanied by an uptick in demand from some of our more traditional markets. Many customers, who had postponed purchases last year due to potential droughts and a surge in supply, are now finding their inventories lower than preferred. This resurgence in interest could positively impact farmgate prices if the momentum continues.
However, it’s crucial to ascertain whether this is a genuine shift in demand or merely a reaction to New Zealand’s recent product scarcity.
Globally, the situation remains challenging, with supplies generally outstripping demand, especially when considering Australia’s contributions.
Despite this, the global market has managed to absorb the lamb supply without stockpiling, thanks in part to lower prices that have kept lamb accessible to consumers amidst a near-universal cost-of-living crisis. This crisis is shaping consumer spending habits, with expectations of continued sluggishness through 2024.
Australia, in particular, has been a significant player, with its lamb exports increasing by 70,000 tonnes in the ten months leading up to February 2024, compared to the same period in previous years. Meat & Livestock Australia (MLA) forecasts another increase in exports for 2024, setting a new record. In contrast, New Zealand’s lamb production and exports are on the decline.
While New Zealand may benefit from tighter supplies in the short term, Australia’s dominance in the global market significantly influences global lamb prices.
Despite predictions of Australian lamb production peaking in 2024, their sheep flock’s growth and productivity gains mean any decrease in production will likely only return to 2023 levels.
The silver lining could be a shift in global demand outpacing supply as economic conditions improve later this year, potentially leading to a sustained improvement in export returns and farmgate prices.
However, this recovery is contingent on global economic conditions improving faster than currently forecasted.
