Minimum price contracts for new season lambs are set to test glass half full theory

Minimum price contracts are out for new season lambs. Photo / File A_290711NZHCCLAMB01.JPG

The nasty, ice-cold front that swept through the region earlier this week was a timely reminder that spring is not upon us just yet.

The 17-20-degree days here in Whanganui over the late July/early August period may have lulled some farmers into thinking spring was here early.

Independent Whanganui commentator, farmer, livestock trader, rural real estate agent and Horizons regional councillor, David Cotton is warning fellow farmers to "watch out".

"I have seen those late storms roll through in late August and September that can play havoc with lambing percentages and produce mud for Africa as you break feed winter crops," Cotton said.

"Meanwhile, the peak of the store lamb markets looks like it happened the week of July 19 when the average sale price hit over $5/kg. But now as the daylight hours get longer and we head toward spring, the time frame to kill old season lambs gets shorter, especially for those lambs that have their woolly jumpers on.

"The main risk is with male lambs cutting their two teeth which makes their value go from a $9 plus schedule to a $2/kg ram schedule.

"The winter lamb contracts at $10/kg kick in during September and it will be interesting to see what other companies do or don't do to compete. But remember, that is for last season lambs with little time left before they become two tooths. I get the feeling $9.50 will stop them, but time will tell.

"The store sheep market and kill price are well above this time last year," Cotton said.

"In August 2020 store lamb was fetching $3.80/kg, the lamb schedule was $7.20/kg and mutton $5/kg.

"August 2021 store lamb is $4.50/kg, lamb schedule price is $9.20/kg and mutton $6.50/kg. In-lamb ewes with not much quality coming through are $250 at the top end, but very quickly back to $150/$175 for lower quality types.

"The new season spring lamb schedule contracts are out and many would be disappointed it is $7.50/kg, but these are minimum price contracts. I think it is a positive and there is enough of a margin for both the hill country store farmer and the finishers to make a quid."

Meanwhile, the cattle market had also picked up both in terms of killing price and the store market over the last few weeks, but not a major difference compared to August, 2020.

In August 2020, store 2-year steers were $3.10 and the kill price $5.50/kg, while in August 2021, store 2-year-old steers are $3.20/kg and the kill price $6/kg.

"It's interesting to note how the store cattle price is similar to last year but the kill price is up 50 cents/kg. What will also be interesting is what happens when Hawke's Bay finally get some grass in front of them - very big cattle buyers influence the markets and I can only see store cattle going one way.

"And last month's comments from the Deroles (Grant and Sarah) about fewer calves being reared is backed up by the huge increase in bobby calves being killed this year along with the live export market going - no surprises here.

"Again, I ask where the store cattle numbers will come from in the next two years," Cotton said.

"With this in mind, buying a few calves and having them running around your farm may be a good insurance policy."

In the meantime, it is threats from elsewhere that concern Cotton more rather than threats from within.

"It's not the bottom falling out of what I consider very healthy pricing in our sheep and beef industry that concerns me, it's the high carbon price at $44 per tonne that worries me.

"I just can't see hill country livestock farmers competing with carbon farming. Is it time to sell the farm or hand over to the next generation? I admit to being biased toward livestock farming, but more on this another day."