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AgriHQ Market Report

LAMB

UK and Ireland lamb prices are booming in response to a low supply of lambs. In the year to 15 May, Ireland has processed 754,900 lambs, 6 percent less than in 2020. The UK is doing worse, processing 3.4 million lambs in the year to April 2021, a 9 percent drop on 2020 volumes. Some of this downside is due to farmers’ stress over Brexit last year, which prompted a heavy flock kill. By contrast, NZ lamb throughput for the year to April 20 is 8.6 million, a 500,000hd lift on year-ago levels and only 1.8 percent behind the five-year average. While demand is strong for domestic lamb in the EU and UK, the retail prices needed to justify the buy-in cost of carcases appears unsustainable.

In April, some butchers were not offering lamb, believing customers would not tolerate the high price. As of April 6, a UK leg of lamb was selling for wholesale at $19.39/kg, a 42 percent lift on 30 March pricing. By contrast, NZ’s lower farmgate is allowing lamb legs to trade for $11.64/kg wholesale in the UK, maintaining a competitive advantage.

BEEF

This season’s NZ steer and heifer kill remains off the chart with over 751,000 slaughtered so far. Compare this with last year’s record high 628,000hd for the same period or the five year average of 596,000. Depending on how you slice it, there has been an extra 123k to 155k prime cattle in the supply chain this season. This is in spite of a very high prime kill last season which probably tidied up most of the drought affected cattle from last spring. In their mid-season update, Beef and lamb NZ had anticipated a 1.6 percent lift in steer slaughter rates due to increasing beef herds. BLNZ also predicted a 4.7 percent reduction in the heifer kill on the basis that heifers would be retained to rebuild drought affected herds. What has happened instead is a 18 percent lift in steer slaughter and a 21 percent increase in heifer slaughter in the season so far.

FORESTRY

In the past month, the AgriHQ indicator for structural logs increased by $4/t, as more Q2 prices began appearing in survey respondents’ data. The North Island contributed to most of this growth. NI logs were reported to be at the top-end of $125-$140/t, whereas the South Island market was $125-$135/t, but again more often towards the top-end of the range.

However, the flying export market is adding a significant volume of logs to the market via woodlots, which are a major source of pruned logs compared to other grades. These extra volumes have, for the most part, kept a lid on pruned log prices. Values were mainly stable, or very slightly weaker in some instances. The national P1 average has now remained between $188/t and $190/t for more than 12 months.