Positive signs for lamb across the ditch

There are really only two places lamb and sheepmeat importers can go to find their supplies, with Australia and New Zealand dominating the markets. As such, it is always worth keeping an eye on what is happening with lamb supplies and prices across the ditch.

The New Zealand sheep flock has been on the decline for many years, as dairy conversions gathered pace.  The New Zealand flock is predominantly meat breeds, so the decline in breeding ewes has also led to a decline in lamb production, at a time when international demand has been on the rise.

Figure 1 shows the New Zealand breeding ewe flock over the past 20 years.  We can also see the year on year change, and there hasn’t been an increase in the breeding ewe flock since 2007.  The decline in breeding ewes has been quite dramatic. 

Since 2003 the number of breeding ewes in NZ has declined 38%, and over the past 10 years it has been 19.5%.  Even this year, when lamb prices have never been better, Beef+Lamb NZ are forecasting a small 0.5% reduction in breeding ewes.

With the decline in ewes, there has been an increase in efficiency.  The lamb crop, which is the number of lambs marked, has also fallen heavily over the past 20 years, but figure 2 shows there have been more years of increase, and the fall hasn’t been as heavy.  Since 2003 the NZ lamb crop has fallen 31%, while the decline since 2012 has been ‘only’ 12%.

This year Beef+Lamb NZ are expecting a small increase in the lamb crop, but it is largely insignificant in the face of improving demand.

Figure 3 shows New Zealand has enjoyed a price rise in recent times, with prices reaching record levels of $NZ165/head in October.  NZ lamb supply is at it’s lows at this time of year however, and it will be interesting to see if prices can hold when the flush comes in the autumn.

What does it mean?

Falling lamb production from New Zealand has been a boon for Australian lamb producers.  Prior to the latest drought period, lamb production in Australia had been rising, and with NZ falling, it has meant prices had kept improving.  With Australian lamb production falling in the last couple of years, prices have spiked, as NZ has little capacity to increase production.

Even in the long term, it doesn’t look like NZ can improve lamb production, short of efficiency improvements.  With little capacity to grain fed, and dairies unlikely to convert back, it looks like any growth in sheepmeat production will have to come from Australia.

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Key Points

  • Beef+Lamb NZ forecasts a slight increase for the 2021-22 lamb crop.
  • Lamb production in NZ is still close to long term lows.
  • Record lamb prices in NZ and tight supply is positive for medium and long term prices here.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: StatsNZ, BeefLambNZ, MLA, Mecardo. 

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