Biggest export markets put the brakes on NZ sheep meat

Biggest export markets put the brakes on NZ sheep meat

NZ Herald, 5 May 2015

Sheep meat prices have fallen by about 10 per cent over the past two months, driven by a drop in demand in China and difficult conditions in another important export market – Britain.

Prices also remain under pressure for dairy products and the log trade, also through a drop-off in demand from the People’s Republic.

China is by far New Zealand’s biggest market for sheep meat, accounting for about 30 per cent of lamb exports and about 70 per cent of its mutton exports.

Murray Brown, general manager of marketing for New Zealand’s biggest sheep meat exporter Alliance Group, said conditions in trade had been difficult over the past two months, following a “reasonable” season in 2014.

According to latest AgriHQ data, the farmgate price for a 17.5kg lamb has fallen by 14 per cent to $4.89 a kg from $5.65 a year ago. Mutton prices have fallen by 23 per cent over the same period.

China – with its estimated sheep population of 130 to 150 million – had experienced high levels of domestic slaughter, which had put pressure on imports from New Zealand and elsewhere, Brown said.

“China has the biggest sheep flock in the world, so when they start culling livestock it does start to put pressure and pain on the market.”

Brown said inventory had been slow to move in the market.

In Britain, domestic production is up by about 6 per cent but the weak euro had made exporting to Europe uneconomic, thereby putting more supply in to the domestic market. In addition, Britain was going through a difficult time in the retail sector, where competition and property writedowns have dragged the big players into loss. Sainsburys is this week expected to report its first full-year loss in a decade while the country’s biggest supermarket chain Tesco in February posted a pre-tax loss of 6.4 billion ($12.8 billion) for the year to February.

Brown said beef faced a more positive price outlook because of ongoing support from the United States.

He said Alliance had seen higher rates in the sheep slaughter over the drought months as farmers destocked, but that they had now returned to more normal levels.

The same could not be said for the beef slaughter, which is experiencing higher-than-normal slaughter rates as dairy farmers reduced the size of their herds in response to sharply lower dairy prices.

In dairy, prices have remained under downward pressure. ANZ economists said China largely remains absent as a buyer and Europe is reportedly still aggressively selling skim milk powder into key secondary markets, such as the Middle East, North Africa and Asian markets outside China.

Aggressive selling from Europe was expected for the next three months as producers there moved through their seasonal peak, they said in a commentary.

In the log trade, export log prices fell to a seven-month low as high inventories on Chinese ports affected demand. The average wharf gate price for A-grade logs fell to $94 a tonne in April, from $106 a tonne in March, the lowest level since September, according to AgriHQ’s monthly survey of exporters, forest owners and sawmillers.

Test targets footrot gene in fine-wool animals

Meanwhile New Zealand’s fine-wool sector is a step closer to eradicating footrot through the use of genetics, says the New Zealand Merino Company.

A joint project between New Zealand Merino (NZM) and the Ministry for Primary Industries is using genetic testing to identify fine-wool sheep with resistance to footrot, and researchers are now close to developing a simple test to eliminate footrot using selective breeding, says NZM.

It is estimated that footrot costs the fine wool sector up to $10 million each year in lost productivity and treatment. NZM chief executive John Brakenridge said finding a way to reduce footrot would significantly improve the sector’s profitability.

Prices drop

• Sheep meat prices drop 10% in two months on low demand from China.

• China accounts for about 30% of NZ lamb exports, 70% of mutton exports.

• Farmgate price for 17.5kg lamb down by 14% on the previous year.

• China’s estimated sheep population is 130 to 150 million.

• British sheep meat prices are being hit by higher production and a low euro.