In Rabobank's latest Agribusiness Monthly report, animal protein and sustainability analyst Blake Holgate said international demand for New Zealand lamb remained strong, which would underpin prices over the coming months as domestic supplies tightened.
The timing and magnitude of pending price lifts would be determined by the flow of lambs to the processors.
There was a healthy jump in farmgate prices during May as lamb production came off its seasonal peak, increasing procurement competition among processors, Mr Holgate said.
At the end of May, the slaughter price in the North Island averaged $7.55kg cwt, which was 3% higher month-on-month, while South Island lamb averaged $7.15, which was 5% higher.
Farmgate prices were now largely in line with where they were heading into winter last year, down just 1% year-on-year in both islands.
New Zealand's lamb kill for the 2018-19 season was down 3% year-on-year, as of April 27. While it had been tracking at similar levels to last season a month earlier, limited supplies through April meant it had now fallen behind.
Beef + Lamb New Zealand forecast the total slaughter numbers for the 2018-19 season to be down 3%.
That would indicate that supply for the remainder of the 2018-19 season would be at least as tight as it was from June to September last season, which corresponded to a healthy lift in farmgate prices over that period last year, he said.
The demand outlook from New Zealand's key export markets remained positive. China and the United States still led the way, with demand and pricing levels holding strong.
There had also been an improvement in sentiment from the United Kingdom and continental European markets, with the delay in the Brexit decision providing some short-term certainty for importers, he said.
Silver Fern Farms' latest market update said the first signs of the lamb kill diminishing, heading into winter levels, were now being seen.
The company believed that would keep market pricing and demand strong. All markets had been performing well over the past few months and it saw no reason why that situation might change heading into winter.
China remained the driving influencer on global prices with strong demand on the back of a growing protein shortage.
The US lamb market had been solid right through the season with strong demand for differentiated lamb product. The market was moving to 100% grass-fed, antibiotic-free, hormone-free lamb as a requirement in future, the company said.
