Rosy outlook for lamb

“High prices, good strong markets and a bit of relief as far as the exchange rate goes…. but what will really matter is where the exchange rate is in January to June - the peak of the season next year,” he told Rural News.

“That combined with what happens in markets and a whole lot of uncertainties that Brexit brings, the Trump administration brings and TPP brings will influence where things will be by then. 

“You can just characterise that as different uncertainties from the uncertainties we have had before. The prices will stick around high – maybe back a little bit.”

B+L NZ is working through its new season outlook now. 

But whether current lamb prices are actually at record levels depends on how you measure them, Burtt says. 

In inflation-adjusted terms they are not much higher than 2010/11 – when there was a battle between the companies. And not as high as 2000/2001, when NZD was down as low as 39c to the US dollar at one point in that season.

Burtt says interest rates in the US are looking like they are heading up; whereas last week’s announcement from our Reserve Bank was about keeping interest rates steady or flat for the next six months or so at least. 

He says that will drive up the value of the USD at the expense of the NZD and will have positive benefits for New Zealand exports.

“Good prices look to continue maybe flattening out there are some positives from the exchange rate which could be good.” 

Moves by China on tariffs have made it an unattractive market for US pork producers. 

“Maybe that increases opportunities for New Zealand lamb and mutton, but maybe also things are slowing down in China compared to what they were.

 “China might put some pressure on the US, but then again the US economy is growing very strongly,” Burtt told Rural News.

“So there are strong markets, but some uncertainties as there always are.”

He has not heard of any issues about getting product to market by Brexit date – which is March 29, 2019. 

“We just don’t know what the issues will be. The closer it gets the more critical it gets as to what arrangement is made between the UK and the rest of the EU,” he says. 

“And what it means as far as quota access and so on goes. 

“And what Brexit does to the UK economy.

“Maybe uncertainty does more than any particular downward trend in terms of their economic activity or upward trend … it is just people not knowing.”

In New Zealand lamb fetches higher prices in late winter as companies try to fill orders – prices over the whole season will be more moderate.

“But in general terms, we are seeing those prices staying pretty much up there. 

“They are at higher levels in nominal terms. 

“However, in real terms it is not quite as dramatic a change and that is something that farmers will be aware of - the expenditure side of things, inflation in their input costs will counter the straight out product prices for lambs or bulls or whatever.”

Burtt has seen reports about $8/kg or even $8.25/kg in some parts of the country when there are fewer lambs round. He says the companies are endeavouring to spread out the shoulders of the season a bit by those sorts of incentives.

“It is the getting that right balance between the genuine seasonality of pasture production and consumer customer demand for year-round supply.”

The more markets the better

Creating a lot of opportunities in different markets has been a positive move by New Zealand – an example of which is a third of our lamb now going to China, says Burtt.

“The exporters and processors have gone through a process of establishing supply chains into China. That tends to be for lower value cuts but they are a significant part of the carcass at the end of the day.” Those weren’t necessarily being sold into other markets,” he says.

“That is one of things that has helped push up prices along with supply side factors such as limited volume. 

“Australia is back and forth with challenges there. Australia and New Zealand are the most prominent countries in exporting lamb. Their seasons vary from year to year much more than ours tend to and right now 100% of New South Wales is officially in drought in the middle of winter. That doesn’t augur well for their production.”