Price of lamb deterring buyers

Keith Cooper
Keith Cooper
Consumers are starting to react negatively to the exceptionally high lamb prices, with one overseas customer telling Silver Fern Farms it will not use lamb in its ready-made meals from next year due to a lack of security of supply and price.

Meanwhile, there may not be as many lambs around this season but farmers seem in no hurry to get them killed, with the South Island kill a massive 20% behind the corresponding time last year.

The kill nationally is 17% behind last year, with the number of lambs killed in the North Island down 12%.

Silver Fern Farms chief executive Keith Cooper said he was not being a "doom merchant", but had twice witnessed venison boom-and-bust cycles and said exporters had seen how consumers reacted to exceptionally high prices and the effect when they stopped buying.

"We're being lulled into a false sense of security because consumers have very little choice today."

It was positive that commodity prices had reached a new plateau as more people could afford and wanted protein, and this was accentuated by a global shortage of sheep meat which was pushing up prices faster than any negative exchange rate effect, he said.

The ideal scenario for the industry was a sustainable market price and low exchange rate.

"It is a bit of a watching brief. We're banking it and we're very pleased to deliver these returns to farmers, but equally it would be wrong for us to throw caution to the wind."

Alliance Group chief executive Grant Cuff said consumer reaction in the next six months, which includes Easter, the end of southern hemisphere lamb season and start of the northern hemisphere spring and summer, would be crucial in measuring consumer reaction to prices.

Mr Cuff said customer reaction depended on whether retailers had absorbed all or some of the higher prices, and that would become apparent.

"It is an environment we have not seen before - for all bits of the lamb," he said of current price levels.

Beef and Lamb New Zealand Economic Service director Rob Davison said with the forecast lamb kill expected to be back 7.8% on last year to an estimated 19.3 million, it was understandable farmers were keeping lambs back to reach heavier weights and maximise returns.

Mr Cooper said the forecast 19.3 million kill could be ambitious, saying the high mutton kill could be a sign farmers were retaining more ewe lambs to rebuild their flocks.

That would be positive for future seasons, but could affect this one.

Mr Cuff said the slow kill was putting pressure on supplying Easter markets, but he believed the predicted number of lambs was there.

In contrast, the mutton kill was nationally 27% ahead of the same time last year, with the North Island 30% ahead and South Island 22%, due in part to prices which in December averaged $88, a massive 70% higher than for the same month a year earlier.

The heads of the two co-operatives said stock flows would pick up soon.

 

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