Average farm-gate lamb prices this season are predicted to ''nudge a few percent'' below last season.
International lamb prices had shown some stability over recent months, following a significant fall.
Prices were around 27% lower than a year ago as they adjusted to balance demand with strong supply from major exporting countries, BNZ's latest Rural Wrap said.
The price decline had outpaced the fall in the New Zealand dollar to date.
While El Nino weather conditions remained a risk, fewer New Zealand lambs this season and an expectation of a mild reduction in Australia production should provide some fundamental price support.
ASB's Farmshed Economics report said strong UK lamb production was keeping prices subdued, as there was a push to ''buy local'' from UK supermarket chains.
Chinese demand was also sluggish.
As well as the threat of El Nino, an additional factor was Silver Fern Farms' proposed joint venture with Shanghai Maling.
In the short-term, the bank suspected a debt-free Silver Fern Farms would be more comfortable paying a premium to secure its necessary volumes. Time would tell as to the longer-term impact on farm-gate prices.
In contrast, beef prices continued to be strong compared with other rural commodity prices.
Steer prices are around 20% above the five-year average.
Over the rest of the year, prices were expected to drift lower.
New Zealand was fast filling its 2015 US quota and that meant meat companies would divert beef to other lower-paying markets, the report said.
Heading into 2016, the risks were more balanced as the US quota reset and supply might also moderate out of Australia.
But that might be offset by El Nino.
If a drought led to increased slaughter, prices might come under pressure.
However, overall beef prices were expected to remain historically high.
In a recent update to suppliers, Silver Fern Farms said there was solid growth in demand for chilled lamb to the UK, the US, EU and the Middle East.
The key period for chilled production was the January-February period to supply customers with product for Easter sales programmes.
Post-Easter, volume demand for chilled lamb was expected to continue.
Manufacturing beef prices in the US were expected to trend higher in the New Year, after unexpected sharp falls in September to early November.
