The recent upside in farmgate lamb prices has slowed.
Most of it came from procurement pressure so it was destined to have only a limited lifespan.
A quick scan of the Australian lamb market shows processors are making weekly price cuts, reflecting the weakness in global markets.
While AgriHQ’s latest Livestock Outlook report points to price increases for lamb going into spring this upside is lower than many have farmed to in recent times. That is on the back of an uncertain export scene, particularly for our higher-value cuts.
Since the spread of covid-19 global demand for lamb has unravelled to an extent and is clearly not tracking like previous years. Key export markets and therefore farmgate prices both face uphill challenges unlikely to go away any time soon.
Overseas markets are stuttering at best and have yet to show any concentrated recovery.
Limiting the volume of lamb shipped to China last month, down 20% month-on-month, seems to have developed some more activity and therefore upside in prices. However, that still leaves lamb flaps more than US$1/kg behind this time last year.
While exporters say export markets are okay they are making that comparison with where they were a month or two ago, rather than what it was like a year ago. There is a long road ahead before we see any buoyancy return to lamb markets and, unfortunately, a second wave of covid-19 through key countries will only delay the recovery.
There is some expectation the winter slowdown in processing and, therefore, lower export sales might be well-timed to generate some demand closer to spring. In a normal trading environment that might be just the ticket but we must look wider than that.
The global realisation that health concerns connected to covid-19 will continue to affect the global economy means consumers might have to adapt to a new norm, which could determine or influence their protein choices. We are already seeing consumers in our more traditional markets opting to trade down to cheaper proteins. That is more pronounced in markets where lamb consumption was already under pressure.
If anything is positive in the trading environment it’s that opportunities still exist. The key challenge is to understand recent changes to lamb demand might not be temporary.
Now, more than ever, we need to sell our story, not just our product.
If we get that right then a $9/kg lamb price shouldn’t be just a memory.
We have already seen the impact of social distancing on the food service and restaurant trade in many markets. Fortunately, for New Zealand lamb, there is some balance with options at both food service and retail.
It is still possible to export lamb to overseas markets but the volumes and values of many cuts are considerably lower than in recent years.
A further drop in lamb production because of lower NZ and Australian supplies might not give the market the boost it needs but further embed lamb as a niche product.