TL;DR:
- New Zealand’s meat processors, including Alliance and Silver Fern Farms, face operational adjustments due to slow stock flows, as farmers opt to fatten lambs on lush pastures.
- The industry-wide slowdown has led to reduced processing capacity, with some plants operating on short weeks and others resorting to airfreighting to meet orders.
- Despite current market challenges, there are signs of potential improvement, with strong Easter demand in the UK and EU, and slight firming of prices due to reduced inventory.
In an unusual turn of events for New Zealand’s meat processing industry, companies like Alliance and Silver Fern Farms are finding themselves in a tight spot as the flow of stock slows down significantly.
Farmers, taking advantage of an abundance of feed, are holding back lambs to achieve heavier weights, leading to a reduction in the number of animals being sent to processors. This situation has prompted processors to review their operational capacities and adjust their working weeks to fill orders effectively.
The slow season is a challenge across the board, affecting all processors. Many plants are now working shorter weeks, and some companies have had to resort to airfreighting lamb to meet chilled orders that could not be filled in time for shipping deadlines.
Silver Fern Farms’ CEO, Dan Boulton, and Alliance’s CEO, Willie Wiese, both acknowledge the need to adapt their processing capacities to the current stock flow, aiming to preserve their workforce for the upcoming bovine processing peak.
The strategic decision by farmers to retain lambs is seen as a gamble on there being sufficient processing capacity later in the season. This season presents a delicate balance of matching processing capacity with stock flows and filling orders. AgriHQ senior analyst Mel Croad highlights the significant lag in the North Island lamb kill compared to last year and the five-year average, while the South Island kill is slightly ahead of last season.
The financial implications of these operational adjustments were felt by Alliance in its last financial year when it employed staff early at its Lorneville plant in anticipation of dry weather that never materialised. The current working conditions at some plants, which include short weeks, are causing concerns about staff retention as workers seek more reliable employment.
The market dynamics are further complicated by New Zealand’s heavy reliance on China, which absorbs about half of the country’s lamb exports. With China’s demand remaining weak for the past eight to nine months, questions arise about the industry’s backup plans should this trend continue.
Despite the challenges, there are small signals of potential market improvement, with lower kills in Australia and New Zealand reducing inventory and slightly firming prices.
As the industry navigates these uncertain times, the strong demand for lamb from wholesalers and retailers in the UK and EU ahead of Easter offers a glimmer of hope. However, the overall sentiment remains cautious, with expectations of a slow period of price increases and no significant jumps anticipated shortly.
