Price of lamb deterring buyers

The very high prices for lamb and sheep meats could come at a cost, with Keith Cooper reporting some customers are suggesting these values are not sustainable.

While all farmers will accept the bonus resulting from high prices for all livestock, most will be fully aware that a sustainable price level into the future has much more appeal.

Deer farmers especially, will know the damage a year of unsustainably  high price levels can have, on many future years of sales.

The slow start to the season caused by a poor spring and then late summer rains, has bought opportunities for farmers to first get rid of cull ewes early, and then finish their lambs to heavier weights on a rising market.

Some southern farmers are reporting this spectacular rise in value for sheep meats and wool, will go a long way to offset the spring stock losses. Bankers will be very pleased that projected losses will be much lower than earlier predictions.

Consumers are starting to react negatively to the exceptionally high lamb prices, with one overseas customer telling Silver Fern Farms it will not use lamb in its ready-made meals from next year due to a lack of security of supply and price reports The ODT. Meanwhile, there may not be as many lambs around this season but farmers seem in no hurry to get them killed, with the South Island kill a massive 20% behind the corresponding time last year. The kill nationally is 17% behind last year, with the number of lambs killed in the North Island down 12%.

Silver Fern Farms chief executive Keith Cooper said he was not being a "doom merchant", but had twice witnessed venison boom-and-bust cycles and said exporters had seen how consumers reacted to exceptionally high prices and the effect when they stopped buying. It was positive that commodity prices had reached a new plateau as more people could afford and wanted protein, and this was accentuated by a global shortage of sheep meat which was pushing up prices faster than any negative exchange rate effect, he said. The ideal scenario for the industry was a sustainable market price and low exchange rate.

Alliance Group chief executive Grant Cuff said consumer reaction in the next six months, which includes Easter, the end of southern hemisphere lamb season and start of the northern hemisphere spring and summer, would be crucial in measuring consumer reaction to prices. "It is an environment we have not seen before - for all bits of the lamb," he said of current price levels.

Beef and Lamb New Zealand Economic Service director Rob Davison said with the forecast lamb kill expected to be back 7.8% on last year to an estimated 19.3 million, it was understandable farmers were keeping lambs back to reach heavier weights and maximise returns. Mr Cooper said the forecast 19.3 million kill could be ambitious, saying the high mutton kill could be a sign farmers were retaining more ewe lambs to rebuild their flocks.The heads of the two co-operatives said stock flows would pick up soon.