New Zealand sheep meat prices are being pushed up to record levels as Chinese buyers look to secure supply ahead of their New Year Celebrations.

The most recent North Island slaughter price for mutton was a record $4.75/kg, compared with a five-year average of $3.32/kg, while the South Island slaughter price lifted to a record $4.80/kg, from a five-year average of $3.06/kg, AgriHQ said. North Island lamb advanced to $7.30/kg, from a five-year average of $6.21/kg, while South Island lamb advanced to $7.15/kg from a five-year average of $5.94/kg, and AgriHQ said lamb prices are tracking above $7/kg for the first time since November 2011.

Sheep meat is popular in China for use in traditional dishes, and traders are buying the meat now to ensure it makes it to China in time for New Year celebrations starting mid-February and to cover demand for the ensuing holiday period. Also known as the 'spring festival', the Chinese New Year falls on February 16, 2018, and the festival will last until March 2, about 15 days in total. As an official public holiday, Chinese people can get seven days' absence from work, from February 15 to 21.

"China's garnered the majority of lamb exporters' attention lately due to their extremely positive demand for the Chinese New Year period," AgriHQ analyst Reece Brick said in his Monthly Sheep & Beef report for November. "Large portions of both NZ and Australia's production are being secured by Chinese buyers as the mid-December deadline for shipments gradually approaches."

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AgriHQ noted that 33 per cent of all New Zealand lamb exported in October was sent to China and Hong Kong, ahead of the 24-to-29 per cent share of exports over the past three years. A similar trend was seen in Australia, with China and Hong Kong accounting for 22 per cent of that country's lamb exports, up from 13-to-19 per cent over the previous three years.

"China's insatiable demand for sheep meat has inflated the mutton market even further than lamb prices," AgriHQ's Brick said in a section of the report titled 'Mutton flying on a high'. "The inability to secure enough lamb mixed with the high price-tag on lamb cuts has led to some Chinese buyers using mutton as a substitute, compounding what was already firm demand."

New Zealand and Australian exporters had reportedly diverted a larger portion of mutton into China to take advantage of the strong demand, Brick said.

The lift in international demand had bolstered confidence in the sheep industry to among the highest levels found in recent years, he said.

Lamb slaughter prices held very firm through October and all indications point towards values holding well above historic levels through until the New Year, Brick said, although he warned there are questions around how demand will fair beyond the Chinese New Year as other markets were "variable", with the EU and the US firm and the Middle East and the UK weaker by comparison.