Buyer war raising prime lamb prices

Weaning hasn't even started and meat companies and stock agents are engaged in a savage procurement war which has pushed the price of store lambs to over $70 and old ewes to $80.

Questions are now being asked what price prime lamb will reach, given the impact of already declining sheep numbers has been accentuated by the death of up to 1.5 million prime lambs in September's storms.

In September, Beef and Lamb New Zealand forecast a 17.4kg prime lamb would be worth $82 this season, the same as last season's return, but given the extreme store lamb price and the impact of the storm there is speculation this year's price could be pushed towards $100.

All meat companies appear to be actively buying store stock, offering $2.50 to $2.60 a kilogram for lambs capped at 32kg liveweight for supply in December and January.

The price is increased to $2.65 to $2.70 if contracts are signed directly with a meat company and not via a third-party stock agent.

A year ago, the store lamb price was $2.30.

Alliance Group chief executive Grant Cuff said $2.60 appeared a reasonable store lamb price given the market for prime lambs.

"That is not unreasonable, but numbers pushed on materially above that are riskier," he said.

Information gathered by the Otago Daily Times reveals ewes and lambs all counted are selling for $65 to $75 and old ewes are making $3.50 a kg in the South Island and $4 a kg in the North Island, making some worth a previously unheard of meat price of $100 each.

It appears all meat companies and stock firms are active and one long-serving agent, who asked not to be named, said industry ethics were being discarded.

All farmers were being targeted and pressured by agents and he said the current market was unsustainable.

He has heard reports of agents driving on to farms and phoning the farmer to offer a price for stock they could see in adjacent paddocks.

"I don't like what I am seeing," Mr Cuff said.

Ewes and lambs all counted were making $65 to $68, but the agent said after Alliance entered the market, within a week the price went to $70 to $75, with the stock being sent to grazing for killing at a later date.

Dunedin farm accountant Richard Farquhar said having previously being told the high dollar was limiting the price companies paid farmers for stock, soaring store stock values did not make sense.

"It is a lot of money given they keep telling us the United States dollar has the biggest effect on meat values.

"Today the New Zealand dollar is at its highest ever value, yet companies are paying more for lamb than they did three years ago."

Mr Farquhar said while farmers needed the extra cash, it was a short-term scenario because industry problems of falling sheep numbers and excess processing capacity remained and would only worsen.

Lamb trader Grant Ludemann said Silver Fern Farms' Lamb Plan scheme set the store lamb price, which opened at $2.50 but quickly rose to $2.60 a kg.

 

There has been some relativity between the prime lamb schedule and store lamb prices, with the export schedule sitting at $6 a kg but falling.

It was also influenced by a later start to the season.

While $70-plus might sound high, Mr Ludemann said there was a buyer and a seller in a transaction, although companies were reluctant to predict what prime lambs would be worth after Christmas.

The high mutton price was due to imports of Australian sheepmeat drying up, as that flock was also contracting.

Silver Fern Farms chief executive Keith Cooper rejected accusations Lamb Plan was setting the market, saying other meat companies and traders were buying more lambs for finishing than his company.

"We've nothing to hide - we're looking after our clients. Everyone is doing Lamb Plan-like models."

Store lamb prices were traditionally high at this time of year, driven by the prime market, but he agreed it was accentuated by external factors such as falling sheep numbers and the impact of lambs which died in the September storm.

The market could change quickly if areas started to dry up.

Mr Cooper said the store lamb market had changed in recent years, with lambs that were once killed at 16kg now put through Lamb Plan-type systems for finishing to higher weights.

Mr Cuff said Alliance was active in the store lamb market and his company would be competitive.

He said the market could change quickly if conditions altered, and it was too early to determine prime prices after Christmas.

However, he said the season was a couple of weeks late due to the difficult winter in the North Island and wet early spring in the South.

Alliance plans to open all its sheep chains as supply and markets permit, with Lorneville starting this week, but stock flows were likely to be impacted early in the New Year by the death of lambs in September's storms.

- neal.wallace@odt.co.nz

 

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