Analyst Intel

24 September 2021

ANALYST INTEL | US lamb demand strong one year on

The US is transitioning from an afterthought for export lamb to a target market.

From March-August 2020, 9900 tonnes of New Zealand lamb was exported to the US, 23% below the five-year average volume. One year on, exports to the US increased to 15,600t, 22% above the five-year average. For the entire 2020-21 season to August, US has taken a 9.25% share of NZ lamb exports, versus a 6.55% share in the previous season.

Lower than average lamb exports to the US last year was due to covid-19 disruptions. US lamb consumption was dealt its first blow when covid-19 shelter-in-place orders were declared a fortnight before Passover and Easter. Paired with Level 4 capacity at NZ lamb processing plants, April 2020 export volumes fell off a cliff. At 1805t, it was the lowest April export volume to the US since 2015. 

Covid-19 restrictions further quelled demand for lamb by disabling restaurant and cruise ship industries, which were traditionally serviced by high-value cuts of lamb. US Frenched rack export prices began a swift decline from the end of March 2020, with prices bottoming out at US$6.00/lb in July, US$2.55/lb less than the five-year average price. 

The first five months of the US covid-19 outbreak were particularly challenging for NZ lamb exporters. Lamb average export values fell by $1.19/kg from March to July 2020, which is normally a period of growth for values. Had China not provided such avid demand for NZ lamb and bought 51% of exports over that period, values probably would have been weaker.

August 2020 marked a turning point for US lamb demand. Export volumes exceeded the five-year average for the first time since March and bar some downside in November, have maintained this precedent ever since. From August 2020 to August 2021, lamb exports to the US have outperformed the five-year average by 5300t. 

A return to reliable, lucrative buying power from the US has contributed to exceptional late season lamb slaughter prices and motivated several processors to offer heady supply contracts. As a result, strong demand from big lamb traders has added intense heat to the store lamb market. Last week, 40kg male lambs were trading for 55c/kg above the five-year average price, while 35kg males in the South Island were trading for 64c/kg above the five-year average. 

Evidently, US demand is stronger relative to year-ago levels. This is despite covid-19 continued impact on the foodservice industry and high levels of daily cases still being recorded in the states. More at-home, adventurous cooking has led consumers to branch out in supermarkets, making demand for lamb more resilient and less reliant on restaurants. This has also helped to dispel traditional distaste for lamb, due to prevalence in tinned wartime rations. While still dwarfed by comparison to the American favourites beef, chicken and pork, lamb’s popularity in the US is certainly on the rise. 

Sarah Friel