NEW ZEALAND-OVERVEIW OF MEAT AND WOOL INDUSTRIES.
Product shortage is currently the main issue for exporters of New Zealand lamb. Despite the increases in the lamb kill over recent weeks, exporters are struggling to fill orders from long-term customers, let alone take on new orders. This situation is expected to get continually worse as the season progresses and the much talked about ’black hole’ in the lamb supply emerges quickly.
Killing space will be tight throughout April with two short weeks in the month reducing processing capacity, which in theory could prompt a reduction in schedule prices. But due to the competitive market situation, schedule price movements this week range from steady to plus 20c/kg in the North Island, and steady to up 10c/kg in the South.
BEEF
The US imported beef market saw strong activity at the start of last week as buyers were actively trying to fill gaps in orders sheets. However, by Thursday this activity appeared to have settled somewhat, with a number of participants pulling out of the spot market as orders were filled and news of another round of subsidised dairy cow culls in the US were released. This latest round is expected to see 200,000 to 240,000 cows culled. If this occurs over the next two months while the New Zealand cow kill is in full swing, this could soften prices further.
The market for prime cuts continues to struggle and this is best shown in the current differential between steers and bulls. The schedule price premium for steers over bulls started the season at around 31c/kg, which is 10c/kg higher than the five year average, but is now currently averaging 11c/kg. This is in stark contrast to last season, where the differential for the same week was 23c/kg and the five year average for this time of year is 17c/kg.
Schedule movements this week ranged from steady to down 15c/kg in both Islands.
WOOL
Sellers of wool at last week’s auction in Christchurch saw prices for most types improve slightly on the previous week. However, a significant amount of product was passed in as sellers continued their stance of not being prepared to meet the market and the clearance rate once again only got to 61 per cent.
With the majority of New Zealand wool utilised for manufacturing carpets, prices continue to remain under pressure as consumers around the world delay building new or redecorating existing houses.
The fine wool market also continues to struggle as consumers of high quality woollen apparel delay spending in the current economic environment.
Prices in NZD terms for fine wool are currently 24 per cent lower than the same time last year and 18 per cent lower for crossbred. However, with the 27 per cent reduction in the value of the NZD against the USD over the same period, overseas buyers are currently paying 45 per cent less for fine wool and 40 per cent less for crossbred in US dollar terms. This is arguably a better reflection of the current state of the global economy and the demand for wool.
There are some glimmers of hope on the distant horizon because as the supply chain continues to empty out, when consumer demand rebounds, a lot of manufacturers will be caught short. With sheep stock numbers in both New Zealand and Australia – collectively the world’s biggest exporters of wool – not expected to rebound in the near future, this can only help our wool industry in the longer term.