Allan Barber points out that the skyrocketing sales of export mutton suggests no slowdown in the slaughter of capital stock

By Allan Barber

Beef + Lamb NZ’s Economic Service has released meat export figures for the first nine months of the season which show that the value of exports topped $2 billion for the fourth time.

Beef shipment tonnage was 4.4% up on last year, lamb was down 3.6%, but mutton was up by a whopping 17.1%.

The FOB value of these exports was well ahead of the previous year in all cases with lamb earnings rising 10.5% and mutton climbing 32.1%.

Beef sales were more restrained with a 1.3% lift in the price per tonne.

This result is highly satisfactory against the backdrop of the seemingly endless strength of the New Zealand dollar, as well as the difficulties of the last couple of years, when sheep and beef farmers’ incomes are taken into account.

Unfortunately it doesn’t signal a permanent change of fortunes or a magic answer to the well-publicised problems of the red meat sector.

But at least at a time when dairy farming is no longer looking like a guaranteed source of wealth, especially for highly leveraged farmers, it is a pleasure to see some better news coming out of sheep and beef.

However there are some concerns behind the figures just published.

The inexorable rise in mutton exports suggests there is no slowdown in the slaughter of capital stock which will inevitably show up in next season’s lamb production.

Although sheep farmers have consistently lifted lambing percentages and average slaughter weights in recent years, the annual lamb kill has declined and will continue to do so, unless capital stock retention reverses its current trend.

The best news for the sector will be a drop in the ewe kill and mutton exports, not an increase in tonnage.

China is the major force in the increase in lamb and mutton export values, but while the price and volume from that market have increased significantly, the average price of lamb is still about $4,000 per tonne or 40% below the price earned in Europe.

Meat exporters have traditionally done a good job of maximising the price achieved from a basket of markets. But the switch from chilled to frozen lamb and the drop in sales to Europe, offset by sales to North Asia, predominantly China, indicate that there may have been a decline in the most effective market and product mix.

Beef sales were more consistent with product and market mix showing a similar trend to previous years, but with evidence that North Asia is also becoming more important at the expense of North America.

However the US market still pays the highest price for beef for processing, mainly hamburger beef.

On the bright side there is plenty of demand for our meat and a wider range of markets prepared to pay a competitive price for it.

It remains important not to fall into the trap of supplying too much to any one market at the expense of others.

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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he runs a boutique B&B with his wife. You can contact him by email at allan@barberstrategic.co.nz or read his blog here ».