Lamb flap prices match record high, on limited supply, strong demand

Strong demand from China combined with limited supply has seen the price for the humble lamb flap rise to match its previous record high.

The price for lamb flaps advanced to $US5.50 a kilogram in January, from $US5.40/kg in December, matching the previous record set in January 2014, according to AgriHQ's monthly sheep & beef report.

Poor lamb growth rates through spring and early summer combined with improved grass growth has crimped the number of lambs being sent for slaughter in New Zealand, pushing up the price of all lamb cuts tracked by AgriHQ compared with their year-earlier levels. Lamb export volumes in December fell 25% from the year earlier to 20,580 tonnes, the lowest level for the month since 2011, according to the latest data. Volumes exported to China were down 40% as demand for lamb flaps, a key ingredient for traditional hotpot dishes, remained strong heading into the Chinese New Year holiday period which started late January.

"Moderate production levels, the transition from frozen to chilled production and low inventories held by processors have all continued to stifle the volume of frozen lamb available to international buyers," AgriHQ analyst Reece Brick said in his report. "In-market prices for flaps have kept nudging upward to the point where they are now in line with the highest level recorded by AgriHQ in the eight years prices have been collected. The short-term outlook is for a similar or slightly firmer market in the coming months."

Elsewhere, the benchmark price of a leg of lamb in the UK increased to £4.50/kg in January, ahead of £4.35/kg in December and £3.35/kg a year earlier. However, Mr Brick said New Zealand dollar returns have been dented by an increase in the value of the kiwi dollar against the British pound.

"Market participants have described demand from the UK as good but there's been nothing positive to report about exchange rates, which appear set to hamper any efforts by exporters," Mr Brick said.

The price for US imported 95CL bull beef, the raw ingredient for meat patties, edged up to $US2.12 a pound, from $US1.92/lb the previous month, and $US1.94/lb a year earlier.

However, Mr Brick noted, that while the US imported beef market had improved, the benefits to New Zealand exporters were undone by exchange rate movements, with prices for 95CL in New Zealand dollar terms down 2% from year-earlier levels.

Meat is New Zealand's second-largest commodity export product behind dairy, according to the latest annual data published by Statistics NZ. The value of meat exports declined 13% $5.9 billion last year, with the value of beef exports dropping by $481 million and the value of lamb by $415 million. The volume of meat exports fell 7.4%, with beef down 14% and lamb slipping 4.6%.

(BusinessDesk)