Lamb price lift heralds better days
The return of $100 lambs for the 2013-14 season will go some way to lifting the spirits of sheep farmers.
Farmer confidence was hard to find during the worst drought in 70 years in parts of the North Island, spreading to a dry summer in Canterbury, and with an average lamb price of $85.
Meat companies believe $100 could be the average price for lamb for the new season starting in October, with industry-good organisation Beef + Lamb New Zealand opting for a slightly more modest $98.50.
The outlook for lambs remained "murky", chairman Mike Petersen said, but meat companies needed to return to profitability and farmers needed better prices, because farm cost inflation was still at 3 to 4 per cent.
"The meat companies' indications are $100 for a lamb and our estimate is $98.50 and that compares to this year's $85."
The all-grades, all-season average of $98.50 was the best estimate and was built around expected lower lamb supplies internationally, Petersen said.
"The lamb outlook is still quite murky and it's hard to get an accurate picture of where we are sitting.
"The indications of the meat companies are lamb prices are rising in the market and that bodes well for this coming season in the 2013-14 year. We wouldn't want another year like last year's returns, which were simply unsustainable."
Lamb supplies are expected to be down 5 million in New Zealand, Australia and the United Kingdom.
Ewe scanning has been poor in Australia, British snowstorms have eroded lamb numbers and Kiwi farmers had to deal with a tough drought last summer that was expected to remove 2 million lambs.
Beef + Lamb estimates this will leave New Zealand with lamb production of 18.2 million, assuming lambing proceeds without mishap.
Petersen said the 5 million shortfall could expect to have a "significant" impact on the lamb market, which usually responded to tighter supplies with higher prices.
It appeared the market would deliver better prices because of the falling supplies, but by how much and to what extent was unknown.
European demand looked as though it would continue to be slow this season, because that market remained under economic pressure.
Markets such as China had developed quickly, but New Zealand still needed a range of markets.
- © Fairfax NZ News