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Lamb flap prices hit record high as slaughter rates decline

Monday 06 March 2017 11:14 AM

Lamb flap prices hit record high as NZ slaughter rates decline

By Tina Morrison

March 6 (BusinessDesk) - A shortage of lamb meat in New Zealand, the world's largest exporter, is pushing up prices, with lamb flaps hitting a record high and prices for many other cuts lifting in export markets.

The price for lamb flaps advanced to US$5.60 per kilogram in February, from US$5.50/kg in January and US$3.45/kg in February last year, according to AgriHQ's monthly sheep & beef report. That's ahead of the previous record set in January 2014.

New Zealand slaughter rates for lamb so far this season are tracking 13 percent below the same period a year earlier at 7.17 million lambs, according to NZ Meat Board data. The New Zealand lamb kill typically runs from December through until early May. AgriHQ noted that poor lamb growth rates through spring and early summer combined with improved grass growth has crimped the number of lambs being sent for slaughter, elevating prices.

"The New Zealand lamb kill has tightened considerably in the past fortnight," AgriHQ analyst Reece Brick said in his report. "Indications suggest slaughter rates in the short-term will be at record-low levels, especially through the east coast of the North Island. There are now serious concerns that numbers may not emerge later in the season, as was previously anticipated following the slow start to the lamb kill."

Brick noted that meat companies in the North Island had been benefiting from dry conditions, which prompted farmers to send their lambs to slaughter. However, multiple bouts of significant rainfall had now generated major grass growth and alleviated concern about stock access to water, giving farmers confidence to retain their stock.

In the South Island, slaughter rates were steadier although South Island meat processors had paid more for lambs than North Island processors in February, the first time this had occurred since AgriHQ began collecting South Island prices 14 years ago, he said.

Brick noted that Chinese demand had remained firm following Chinese New Year celebrations, helping elevate lamb flap prices. Benchmark prices for a leg of lamb, french racks and forequarters also rose.

"Demand fundamentals have remained stable in both the US and continental Europe, but limited supplies have pushed in-market returns upwards," Brick said. "Both sides of the international lamb trade are becoming increasingly anxious about current market conditions. It is widely agreed that a lack of product is providing a foundation for in-market lamb returns, and there are doubts about its sustainability."

Brick said doubts are starting to emerge about whether the number of lambs sent to processors will pick up in March as previously anticipated, which is disrupting planned sales activities in international markets.

Weaker supply could push lamb prices higher, with the risk they could then collapse, he said.

"Likewise, if kill numbers emerge with any volume then a swift reversal may be on the cards," he said.

Meanwhile, the price for US imported 95CL bull beef, the raw ingredient for meat patties, rose to US$2.23 a pound, from US$2.12/lb the previous month, to be little changed from US$2.22/lb a year earlier, AgriHQ said, noting that bull meat availability was in decline because February is at the back end of New Zealand's peak bull slaughter period and cow culling has yet to begin.

"Expectations from the New Zealand market are for a steady-to-softer market in the coming weeks," Brick said. "The New Zealand cow cull is still a few weeks away which will keep supply from New Zealand moderate. Easing is likely once New Zealand exporters begin shifting larger quantities of cow meat."

Meat is New Zealand’s second-largest commodity export product behind dairy, worth $5.93 billion in the 12 months through January, according to the latest data published by Statistics New Zealand.



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