Lamb export prices increase to multi-year high on soft supply, solid demand

Export prices for lamb pushed higher last month as solid demand overseas coincided with soft supply from New Zealand, the world's largest exporter of lamb meat, according to AgriHQ.

Benchmark frozen lamb prices for legs, french racks and forequarters all lifted in April to hit multi-year highs, according to AgriHQ's latest monthly sheep & beef report.

The benchmark price for a frozen leg of lamb in the UK rose to 5 British pounds/kg in April from 4.80 pounds/kg in March and from 4.35 pounds/kg a year earlier to the highest level since November 2011, AgriHQ said. In the European Union, the benchmark increased to 5.75 euro/kg from 5.70 euro/kg in March, 5.40 euro/kg a year earlier, and was the highest level since July 2015.

For frozen french lamb racks, the benchmark price in the US rose to US$8.50/kg from US$8.25/kg in March, US$6.65/kg a year earlier and hitting the highest level since December 2012. In Europe, the benchmark rose to 17.25 euro/kg from 16.75 euro/kg in February, 13.50 euro/kg a year earlier and the highest since March 2012.

The price for a five-rib forequarter increased to US$5.20/kg, from US$5/kg in March, US$3.75 a year ago and the highest level since November 2014.

The benchmark lamb flap price remained stable at US$5.75/kg compared with the previous month, as demand from China steadied as Asia's largest economy approached its lower consumption period, AgriHQ said. Still, prices are up from US$3.90/kg a year ago and remain at the highest level since September 2014, AgriHQ said.

"Exporters have kept finding solid demand out of both the UK and continental Europe," AgriHQ analyst Reece Brick said in his report. "UK importers have shown good demand for the last few months" while "continental Europe is hopping from strength to strength."

A weak British currency had stoked UK exports to continental Europe, leaving the UK market a little shorter than normal on supplies, Brick noted.

Other markets were also firm, with prices in the Middle East and the US trending upwards through April, and low levels of exports from Australia were also helping elevate prices, Brick said.

"Weak offerings from both NZ and Australia have pulled returns from the Middle East upwards, acting to bring the level for forequarter above last month," he said. "There's a little resistance being felt in the US due to the ongoing lifts in rack price, but exporters aren't concerned, and feel it should at least hold in the coming weeks."

Brick said the rise in overseas prices combined with low lamb availability had translated into "impressive returns" for local farmers, with the national average slaughter price offered by meat processors up 7 percent over the past four weeks, hitting the second-highest level ever recorded for this point in the season, and only lagging the "exceptional" 2010-11 season.

"There's common optimism within the sector that kill prices will at least hold into winter," he said. "The only factor that could disrupt the market is if a sudden wave of lambs went to slaughter. While possible, this is unlikely to occur."

Meat is New Zealand's second-largest commodity export product behind dairy.

(BusinessDesk)