NZ farmers face pricing pressure due to high Aussie lamb supply

According to Beef and Lamb New Zealand's new season outlook released in October, lamb and mutton exports are looking more positive for 2023-24 with lamb export receipts forecast at $3.52 billion FOB, up 4.8 per cent on 2022-23.

But while prices are expected to improve, it is still expected to be a challenging year for the Kiwi sector.

Beef + Lamb New Zealand CEO Sam McIvor said the current Australian lamb glut was undeniably placing pressure on New Zealand's lamb and mutton exports.

"Mutton and lamb prices are currently 45 per cent and 15pc below the five-year average respectively, significantly impacting New Zealand farmers' profits, which are forecasted to average more than 60pc lower than two years ago," he said.

"New Zealand's products are in some cases quite different to Australia's, nonetheless the volume of product in the market as well as inventory is having an impact.

"Nearly 50pc of New Zealand's total lamb exports go to China, which has been significantly affected by Australia's surplus, coupled with China's weakened economy.

"While some markets like the EU27 and the UK have held up better, the overall impact on New Zealand's market share, especially in China, has been a hard knock for many farmers."

Mr McIvor said the NZ price decline was still a lot less significant than what had happened in Australia.

"In some markets (like the US and UK where we sell legs and racks) New Zealand has been able to differentiate itself from Australian product as our smaller cuts are valued by our customers," he said.

"Lamb prices in New Zealand have taken a knock, with the latest prices for lamb currently around $6.30 per kgCW, 15pc lower than the five-year average, this is particularly impactful on those farmers with high sheep ratios.

"These price drops combined with high on-farm inflation, raised interest rates and extra costs and uncertainty related to regulatory changes is significantly impacting farmer profitability and undermining farmer confidence."

Data from NZ's Meat Industry Association as of October shows New Zealand sheepmeat export volumes have actually grown by 17 per cent from the previous year to 26,170 tonnes, its value dropped 6pc to NZ$264 million.

MIA policy and trade manager Ashlin Chand said key markets feeling the pricing pressure are China and New Zealand.

"Over the last three months Australia has exported 30,000 tonnes more sheepmeat than it did in the same period last year as dry conditions in parts of the country have led to destocking," she said.

"Conditions in Australia are difficult to forecast.

"If drought in Australia is as severe as originally forecast liquidation of the flock will likely continue until early next year.

"However, if the drought is not as severe, supplies may stabilise quickly because there has already been a significant reduction of the breeding flock.

"This could mean that in the future there will be fewer ewes for mating so that in 2024 (and potentially the first half of 2025) there may likely be fewer Australian lambs being processed and supply pressure may come off the market a bit.

"The cyclical nature of sheep and beef production means that at some point supplies from Australia will stabilise.

"As this is something that it is out of our control, the New Zealand meat industry will focus on things that we can control, such as minimising costs and continuing to extract the best value that we can from each carcass."

Ms Chand said demand for New Zealand lamb was expected to remain relatively steady, with some recovery of prices within the next 12 months or so.