As drier weather spreads across more regions, global forces depress lamb prices although dairy prices start turning up. Guy Trafford reviews the new year outlook

This year is starting much as the old one finished. Dairy on a promise of good things or better things ahead while beef and lamb and to a lesser extent venison continuing the woes that began over twelve months ago.

This time last year we came out of the Christmas New Year slumber to see beef and sheep meat prices had plummeted and nothing much has changed. At the national average level, lamb has dropped $2 per on a 17.5kg schedule since before Christmas, fortunately well behind the $11 experienced last year and prime cattle fallen only 10 cents per kg on the 295-320kg schedule. It was a $0.183 fall last year.

However, we are starting from a much lower base. Local trade lamb in the South Island has joined in the falls this time around, they are often the last to reduce prices but lately 50c per kg has been trimmed off the schedule.

Where prices do appear to be particularly tough, although I’m making this observation from limited sales, is in the store market. This seems to be occurring with both sheep and cattle. Not surprising perhaps given the poor outlook for livestock in the medium term.

The lack of demand for lamb in the UK was visibly shown in the UK just prior to Christmas with New Zealand lamb approaching its ‘Use By’ dates being flicked out at 20 pence a leg or reduced to 10 pence with loyalty cards at Sainsbury Supermarkets and gift for the UK but a bad signal back to farmers struggling to make ends meet in New Zealand.

And, finally, at least in Canterbury, we are seeing the effects of the El Nino pattern taking effect. Throughout the country, but east coast regions in particular, fire bans are in place and rural brigades starting to get busy putting out random fires. To date we haven’t seen the large ones occurring, but early days yet. So, while there is plenty of dried off feed around, unless grown under irrigation, quality feed is disappearing and adding to both more numbers coming out to sale and reduced demand from finishers.

Fortunately, dairy has also continued where it left off and with the exception of a small drop back in early November there have now been 9 lifts on the trot lifting the GDT average by around 25% and WMP (in US$) by over 30% since the last big falls back in August. Not all of this translates into as a rosy picture in New Zealand dollars as that has increased over the same period eroding some of the gains going from a recent low of 57.8 USc back on October 23rd to 61.4 USc today although it was as high as 63.4 USc back on the 29th of December. Hopefully the finance traders within Fonterra have been able to hedge to worst effects of the volatility to help preserve the price increases.

In the meantime, the wars in Ukraine and Middle East continue with trade routes being disrupted around the Red Sea, which is likely to add more costs to freight.

A plus has been the general lack of much controversial ‘stuff’ coming out of the Beehive over the Christmas break, at least regarding agriculture. However, given how long the setting up of the new government took, which then led into the summer break, many will be keen to start conversations to roll back many of the previous governments policies. To date what announcements have come out have been focused on transport (or the lack of), although some positive signals around the potential of a four year government term has been mooted.

After the last election, many will be thinking the longer between drinks the better, regardless of who’s holding the reins. So, with another year ahead all will be hoping for plainer sailing than the last but I for one will not be making any predictions.