Analyst Intel

2 March 2020

ACROSS THE RAILS | Season's fast start might hit winter stock numbers

By Mel Croad Mel Croad

The carry-over of livestock into 2020 combined with dry conditions and market uncertainty have led to a sustained rush of stock into processing plants. Prices received at the farmgate have reflected all of the above with some falling to six-year lows. 

For lamb, which continues to move well through export channels, prices are still sitting historically high, albeit down $2/kg from their peak. Beef and mutton, on the other hand, continue to be influenced by stuttering export conditions. The weekly falls in prices look to be slowing but will be sustained only if the flow of stock into plants reduces. Autumn might be here but weather conditions have yet to show much directional change. It’s hard to shift the focus from right here, right now but it doesn’t hurt to look at the bigger picture.

Industry estimations didn’t pick a lift in the lamb crop this season though at farm level it certainly felt like there were more lambs to lift at docking. What they did indicate was static slaughter rates, regardless of the lamb crop tally. The flood of lambs into North Island processing plants in recent weeks and the flow of store lambs heading to the South Island will create supply gaps through winter, especially in the North Island. It is a similar situation for beef. More than 80,000 extra cattle were processed nationally by the end of January. With many still awaiting slaughter this gap will only widen, limiting market availability through winter.

While it might be tough going now, look to Australia to see the positive impact rain is having on the sheep and cattle markets. Demand has spiked as farmers look to restock while others retain what stock they have left. An even flow of stock will always support farmgate prices, a flood of stock will do the opposite. We need the rain, not only to ease the on-farm pressures and stress but also to stem the flow of stock to processors to regain some sense of normality. Otherwise we are in for an interesting trading environment through winter on the basis of much tighter supplies.