Lamb prices soar, flock wanes

Prime lamb prices may be soaring, but analysts still predict a 3% reduction in ewe numbers this year, following a 10% decline last year.

Meat and Wool New Zealand's Economic Service executive director Rob Davison said the expected decrease of one million ewes would be accentuated by an ageing flock, low retention of females, drought and continued land-use change, albeit at a slower rate than in previous years.

This would take the ewe flock to about 33 million, but Mr Davison forecasts a heavier lambing due to favourable conditions when ewes went to the ram.

He expected 27.85 million lambs to be born this spring, 850,000 more than last spring.

"This outlook, as usual, depends on a normal spring and variations in the outcome depend on actual spring conditions."

A continued shortage of lamb could see sheep farmers enjoy a second year of close to $90 for their prime lambs.

Alliance Group chief executive Grant Cuff could see no reason for lamb prices to ease next year, other than an unfavourable exchange rate.

There was still a world-wide shortage of sheepmeat and companies were targeting higher-priced markets.

Meat and Wool New Zealand report export lamb returns from October 2008 to March were up 27% to $8670 a tonne compared with the same time a year earlier.

Sales through retail outlets in Europe and the United Kingdom were strong, as the recession encouraged consumers to eat at home.

Mr Cuff said retail sales in China and North America were growing.

While exchange rate movement remained a threat, banks and observers have forecast it to weaken in the coming year due to a low official cash rate of 2.5%.

This would benefit exporters.

Silver Fern Farms chief executive Keith Cooper said another reason for strong prices was the greater volume of lamb being sold as chilled and earning premium prices.

"There is a totally different matrix of product types and forms," he said.

The ANZ commodity price index, which tracks movement in the price of commodities, reported this week the index for lamb hit a 23-year high and indications from companies were that that momentum was unlikely to slow.

In its latest market update, SFF said demand for chilled lamb was increasing as customers secured contracts ahead of the seasonal lamb-kill wind down.

Mr Davison said this season's 27 million lamb crop was the smallest in 51 years and resulted in a 23% decline in the number of lambs available for slaughter.

Next season's lamb crop would be the second lowest in 52 years..

Last year's lambing was 113%, the lowest in five years, but the better condition of ewes this autumn could see, weather permitting, a lambing of 118% to 119% next spring.

Mr Davison said lambs born to hoggets made up 3.6% of the lamb crop in 2007 but that fell to 2% last spring.

He expected hoggets to contribute 2.5% of the lamb crop this season.

It was too early to pick the number of lambs available for slaughter next season.

"The increase in export lamb availability on last year could equal the increase in the lamb crop, but will finally be determined by the number of lambs retained as replacements for future production."

The ANZ commodity price index for April said two-thirds of mutton and lamb exports went to the EU, with the UK accounting for a quarter of all exports.

China is New Zealand's eighth largest customer behind Saudi Arabia, with export to China last year up 59% on 2007.