Farmgate prices rise as farmers rebuild confidence
Sheep and beef farmers are cautiously optimistic as farmgate prices continue to firm.
Lamb prices have cracked the $8/kg mark for the second successive year and things could get even better.
ASB senior rural economist Nathan Penny believes there’s a “50/50 chance” of a record.
“At this juncture, we think there is a 50/50 chance that lamb prices will set record highs over spring, particularly as current prices ($8.25/kg) are neck’n’neck with this time last year,” Penny said in ASB’s Commodities Weekly report.
Nationwide prices last year topped out at $8.43/kg.
NZ lamb exports to China are booming because African swine fever has butchered the Chinese pork industry, leading consumers to seek other proteins.
Rabobank animal protein analyst Blake Holgate also expects lamb prices to end the season on a high.
And he notes that prices in the North Island and South Island have crossed the $8/kg mark. In late August the NI slaughter price averaged $8.35/kg and the SI averaged $8.10/kg.
Holgate says export market sentiment remains positive but key markets are performing differently.
“While China’s strong demand and pricing show no sign of waning in the immediate future, there are reports of some weakening of demand in the UK, Continental European and the US,” he said.
“At this stage, pricing has not been materially impacted in any of these markets, in part due to the limited volume of product available out of NZ.”
Penny notes that lamb export supply remains relatively tight in NZ and Australia.
The rise in conversions of sheep/beef land to forestry will reduce lamb supply in the next few years.
“While not necessarily a great development for the sheep industry, these conversions will nonetheless underpin lamb prices for an extended period,” said Penny.
According to the most recent Rabobank Rural Confidence Survey, farmer confidence has inched higher, reaching its second highest reading in the last decade.
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