Situation and Outlook for New Zealand Agriculture and Forestry (August 2008)
16 Lamb
New Zealand, like other lamb-producing nations, is experiencing a marked decline in its sheep flock. This reduction is expected to continue in coming years, affecting lamb production. However, it’s not all doom and gloom. New Zealand lamb schedule prices have been holding steadily above last year’s due to more favourable results in our European markets.
Drought and poor lamb schedule prices resulted in sheep numbers dropping by 4.1 percent for the year ended 30 June 2007. Since then, with an even worse drought and only limited improvement in schedule prices, the slaughter of adult sheep has accelerated further and is expected to be up by at least 10 percent for the year ended 30 June 2008.
Major lamb producers with shrinking sheep flocks include New Zealand, Australia and the UK. Australia experienced two consecutive seasons of drought, which saw sheep numbers drop 6.5 percent to 62 million as at 30 June 2007. Australian sheep numbers are expected to have dropped further for the year ended 30 June 2008, depressing Australian lamb production. Beyond 2008, the Australian sheep flock is expected to increase, assuming normal climatic conditions.
As well as being New Zealand’s largest export market for lamb, the EU is a large producer in its own right. However, EU sheep meat production has been declining as a result of policy reform and poor returns. This decline is expected to continue.
Demand in the EU is not growing, however. Consumption of lamb per person in the EU has been static, and has decreased in some years. In alternative markets for New Zealand lamb, some of which have increasing demand, prices are at much lower levels than in the EU.
The outlook for lamb prices in New Zealand’s export markets is good as all major lamb-producing countries, New Zealand included, are expected to produce less lamb over the next few years. This reduction in supply is larger than declines in demand in the key markets. The assumed depreciation in the New Zealand dollar means that lamb schedule prices in New Zealand are expected to increase significantly over the next four years.
Animal disease in the UK
In the second half of 2007, the UK experienced foot-and-mouth disease and Bluetongue outbreaks. These outbreaks disrupted stock movements and slaughter in the UK for several months, during which time prices for imported lamb improved. The UK was declared free of foot-and-mouth disease in February 2008 and a vaccination programme is being rolled out to deal with Bluetongue.
Exports
For the year ended 31 March 2008, export earnings dropped by 7.3 percent to $2.1 billion and 326 000 tonnes of lamb were exported, which is 2.4 percent down on the previous year. Export volumes and earnings for all major markets were down, with the exception of China and Saudi Arabia. Both these countries have seen increasing import volumes and are emerging markets for New Zealand, especially for lower-value cuts.
In terms of value, the EU remains well in front when it comes to lamb exports. However, EU lamb consumption is static and domestic production is declining.
Export volumes are forecast to fall in 2008 and 2009, due to the drought and a smaller lamb flock.
Table 16.1: Lamb prices and export volumes and value, 2005–2012
| Actual | Forecast | |||||||
|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Lamb schedule price1 (cents/kg) | 389 | 333 | 323 | 342 | 384 | 399 | 425 | 438 |
| Export volume2 (000 tonnes) | 292 | 295 | 334 | 326 | 297 | 293 | 295 | 287 |
| Export value2 ($ mil) | 2 062 | 1 991 | 2 253 | 2 089 | 2 245 | 2 404 | 2 596 | 2 619 |
Notes
1. Year to 30 June. 2008 fitures is estimated.
2. Year to 31 March.
Sources Meat & Wool New Zealand, Statistics New Zealand and MAF.
Figure 16.1: Lamb export destinations, by value, year ended 31 March 2008
Source Statistics New Zealand.
Production
The conversion of land from sheep farming to more profitable uses such as dairy and dairy support is expected to contribute to a falling adult sheep flock in the future. Fewer ewes and drought-depressed lambing percentages meant the number of lambs born in the spring of 2007 was down by about 5 percent. Another dry summer caused lamb slaughter weights to fall by 3.8 percent for the March 2008 quarter. Accordingly, lamb production is expected to have decreased by 5 percent for the year ended 30 June 2008.
The recent drought drove farmers to slaughter more sheep than usual in the 2007/08 summer, which meant that fewer ewes and hoggets were available to put to ram in the autumn of 2008.
As well as fewer animals for breeding, many are in poor condition, which will lower lambing percentages. Because of this, a smaller lamb flock is expected in the spring of 2008 and hence production is likely to be down again for the year ending 30 June 2009. While, over time, lambing percentages are improving, this is not by enough to counter the total decline in sheep numbers. Lamb production is expected to continue to decrease over the forecast period, but at a slower rate after 2009.
Figure 16.2: Adult sheep slaughter, 2007/08 season relative to recent average
Source MAF.
Contact for Enquiries
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