Analyst Intel

4 September 2020

PULSE | La Nina – a last ditch chance for lamb?

By Mel Croad

A brewing La Nina weather pattern may be what the doctor ordered for regions still concerned about dry conditions.

However, if it develops like expected in Australia, there could be an added bonus for NZ lamb producers too.

Australian meteorologists are on high alert for a La Nina weather event to develop through spring. The probability of this developing in Australia has jumped to 70% - three times more likely than normal – and chances are NZ will follow suit. A La Nina typically brings more rain to eastern regions of Australia, which would leave these farming regions well set-up for 2021. This year started out wet for much of the country, but the likes of Queensland have started to dry out since.

Herd and flock rebuilding springs to mind whenever Australian farmers receive useful rain at optimal times of the season. Many have made some headway this year after successive droughts, but spring rains would be the icing on the cake.

The last significant La Nina event in Australia was in 2010, bringing with it significant flooding and damage. According to historical AgriHQ reports, that La Nina shaped the supply of Australian lambs into processors through the back end of 2010. Good feed levels meant farmers were under little pressure, farming lambs to heavier weights while taking advantage of the improved feed conditions.

By December 2010, the tighter supplies became significant, reducing Australian exports, and leading to stronger pricing in export markets. As export values increased, NZ farmgate lamb prices benefited.

Interestingly back in 2010, Australia’s exposure to the global lamb market was limited to 40% of annual production or 150,000 tonnes. Australian lamb exports this year have lifted to 70% of total production, meaning export volumes have nearly doubled in the last ten years. The La Nina event that gripped Australia ten years ago was significant in that it reduced Australian lamb exports enough to underpin a lift in global prices, despite them being a relatively small player. 

Global markets are now accustomed to relying on an increasing volume of lamb from Australia. If a strong La Nina system develops this year, which allows Australian farmers the chance to delay lamb slaughter and further rebuild flocks, then the impact on lamb exports is going to be bigger than in 2010.

The Australian new season lamb supply is already advanced versus normal, but wet weather could quickly change that. Therein lies the opportunity for NZ lamb to capitalise on any supply challenges. However, for any advantage to be gained in terms of lamb prices, we would have to overcome the current weaker outlook for lamb and right now that is a major hurdle.

While a weather forecaster will tell you no two La Nina’s are ever the same, any reduced competition from Australia in our export markets combined with a potential slowdown in production here may be enough to spark some life into the lamb job. After the year we have endured, finding the positives, however small, must be our focus.