In the 2011/2012 season, for the second time in a row, sheep and beef farmers had good returns. However, with summer now over prices have dropped leaving many farmers sitting on store lambs worth less than they paid for them.
While the average price for lamb in the 2011/2012 season is looking to be about $115, just down from last season's
average of $117, there has been some debate as to what extent the Global Financial Crisis will affect future pricing.
Concerns remain, such as the effect of the exchange rate on farm-gate prices and the fluctuating New Zealand dollar
(NZD). The high NZD early in the year took the gloss of the high in-market prices and took its time to fall once the world prices began to fall. It remains to be seen how much of the benefit accruing from the recent drop in the NZD will be passed on to farmers by processors.
The season started reasonably well with only a few spring weather interludes which did not greatly affect lambing percentages across the country.
As a result national lambing was up 7 per cent, with the North Island lambing percentage average approximately 117 per cent and the South Island approximately 120 per cent. The overall lamb crop was around 26 million, but this was still the second-lowest lamb crop in 55 years.
With many areas of the country experiencing some of the most favourable summer conditions in memory, it was a surprise when Southland experienced extremely dry conditions, verging on drought. However, while Southland farmers were under pressure to quit lambs earlier than expected, the majority were able to maintain a good price for their lambs.
In North Island regions, with favourable weather and good feed covers, lambs were able to be finished earlier and to heavier weights. This also gave farmers opportunities to sell or put extra feed away for future use.
In other areas, greyer and cooler than- usual weather conditions meant lamb finishing was on average a month behind, but good weights and returns were still achieved.
During summer arable farmers, store traders and processors were in the market to secure lambs for autumn and winter contracts, which resulted in some of the best store stock prices to be had for some time.
During this time lamb was fetching about $8 a kilogram of carcass weight - in the face of a high currency. While some were reluctant to pay these prices, others were eager to buy in. Some farmers have argued that meat processors should not have been in the market to secure lambs for finishing contracts or other agreements. However, others were
happy with the situation, which gave them the opportunity to engage in these arrangements.
With renewed market confidence, more mixed-age ewes were purchased and pricing for these animals also held on very well. More ewe lambs were retained on farm for replacements. In the latter end of the season, with the European Christmas and Easter trade long gone, lamb prices dropped from those lofty summer heights to about $6 a kilogram carcass weight.
There is now most certainly a global market push back as the price for lamb in the market is now too expensive for people to purchase. Processors are sitting on full chillers and freezers, and farmers are holding on to store lambs now worth less than originally paid for.
Pre-Christmas processors were looking at an uncertain global market. Later, the situation looked to be settling down although spending in our offshore markets was still conservative.
Now, with a global double dip recession threatening, the lamb market is taking a large hit in returns as consumers say "no" to New Zealand lamb. As the European spring season gets under way there will be further competition for New Zealand lamb in the supermarket. There has been an increase in co-products for lamb, but this will not off-set a downturn in lamb consumption.
So for lamb, next season is looking less rosy. However, long-term demand for protein and food in general is still high. As we constantly hear, "the world needs food".
In the future there will be opportunities for New Zealand meat proteins in other countries, but these markets are still young in terms of development and relationships.
Sheep and beef farmers will need to look at further production gains from a smaller environmental footprint. While this may seem difficult, Kiwi farmers are highly adaptable. In the past we have made great productivity gains and what we need now is good science, the right opportunities and a willingness to adapt.