Record prices but flock shrinking

As the farm gate price for lamb hits record levels opinion is divided on whether it's enough to see the declining industry turn a corner reports The NZ Herald. The national sheep flock is now down to levels not seen since 1950. Rabobank's latest Agribusiness Review said farm gate lamb prices had strengthened since January, hitting levels more than 50 % up on last year. Rabobank senior analyst Hayley Moynihan said prices would be enough to improve profitability but were probably not enough to encourage more investment. The smaller flock had pushed up prices, she said. "Our sheep flock has fallen so much because producers have got out because it's unprofitable, but they're not yet at the point where producers are going to start expanding the flock numbers again. "I'm not sure that farmers necessarily have the confidence that we'll see the next five years at these prices for example, it's been reasonably short term so far." According to Statistics NZ the national sheep flock was 34.1 million as at June 30, 2008 - a drop of 11 % on the previous year and the largest annual fall since numbers peaked at 70.3 million in 1982. Factors behind the drop in sheep numbers included drought, market conditions, competing land use, exchange rates and rising costs. "The increase in prices to current levels is really only covering that high cost base that's come through in the last five years," Moynihan said. The lamb slaughter was tracking 15% below last year and mutton processing was down more than 20% . "In terms of lamb the contraction in supply has been such that it's likely to support higher prices next season as well," she said. "Particularly given that lamb supply is contracting globally, if we look at Europe, certainly the US, other producing nations they tend to be seeing falls in both their sheep flock and lamb production too." However, it was harder to predict the three to five year outlook and there were risks in the current economic environment, particularly given that lamb was typically a high price meat, she said.

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