Strong milk production in New Zealand is putting downward pressure on global dairy prices.
That’s the view of ASB’s senior rural economist Nathan Penny, who says he’s running out of superlatives to describe the performance of lamb prices.
Data shows the lamb price constantly rising and passing $8/kg, he says, and there is speculation that it could reach the magical $9 number in October.
Penny doesn’t get too carried away about the future for lamb, except to say that whichever way you cut it, prices are strong -- good news after a long lean period compared with other sectors. “The reason for the high prices is strong demand from a number of fronts. We had expected that post-Brexit the UK would weaken substantially, dragging down overall lamb returns, but that hasn’t been the case,” he told Rural News.
“Other markets have stepped up – the US and Europe; those two markets have been strong, so has China.”
Penny says those markets have picked up the UK’s slack, but the UK hasn’t been as bad as he thought it would be. “There’s been pretty good growth globally. Economies have been strong and that has flowed into incomes and demand for lamb. So all up it’s a really good story for lamb and it’s been a while between drinks for lamb producers so the price rise is welcome.”
Penny says there’s a risk that rising lamb prices could make it too expensive for consumers, who would switch to less expensive proteins. But so far the consumers have accepted the lamb prices. After a predicted spike of prices in October, the ASB foresees easing as the season progresses.
Penny thinks the US/China trade wars are playing out a bit more than was first thought, and drought in Australia could see more lamb coming on the international market as farmers seek to cut their losses.