The United Kingdom was coming off an extremely hot summer.

Warning of softening farmgate prices

Tim Fulton

Customers may turn away from New Zealand sheepmeat unless prices soften, exporters say.

The biggest lamb exporter, Alliance Group, expects farmgate prices to remain comfortably above five-year averages but is preparing farmers for a lower schedule.

“The prices are very, very, very strong from a New Zealand point of view and we need to be mindful that there’s a couple of key markets that have got a little bit of inventory, and it’s high-priced inventory. They’re not screaming; they’re just saying ‘be cautious’,” general manager of sales, Murray Brown said.

The United Kingdom was coming off an extremely hot summer so barbecue products sold well while lamb sales were probably down 8-9%.

“They’re coming off a little bit of low confidence and they’re also aware they’re not going to get a lot of product in (from NZ) over the next two or three months.”

‘The prices are very, very, very strong from a New Zealand point of view and we need to be mindful that there’s a couple of key markets that have got a little bit of inventory, and it’s high-priced inventory. They’re not screaming; they’re just saying ‘be cautious’.’

Brown said farmgate prices were exceptional but he expected them to ease.

“Next year’s pricing is still going to be, on average, higher than the previous five years. I suspect it could be $1.50/kg better than a five-year average.”

ANZCO general manager of sales and marketing, Rick Walker, said current schedule prices can’t hold and it had customers in Japan and Europe who were reducing their sheepmeat exposure.

ANZCO tried to maximise value from chilled product and sell into premium markets. The industry had to be wary of a “race to the bottom” in which companies tried to offer farmers unsustainable prices in order to secure stock as it would increase the chance of a crash in the market, Walker said.

Silver Fern Farms general manager of sales, Peter Robins, said prices were certainly under pressure but inventories in-market and in NZ were much lower than in 2012 when the price last fell dramatically. Some minor price-easing was likely to help stabilise markets, Robins said.

Domestically, pricey NZ lamb was an expensive treat but chefs were preparing it differently to keep it on the menu.

Lamb was an expensive niche protein for retail consumers but SFF was actively promoting in-range in different ways to encourage people to include lamb in their meals at home in non-traditional ways, Robins said.

The growth of casual dining meant lamb was not just a fine dining experience. The typical lamb rack cut had evolved into innovative use of secondary cuts like neck, belly cuts and slow-cooked shoulders, he said.

Walker moved from Fonterra to ANZCO 10 months ago and immediately noticed the “dislocation” between farmgate prices and markets.

The company was trying to pay farmers well while still keeping lamb within reach, he said.

“You get to a point with lamb, which is a nice problem (for farmers) where people will just give up on it.”

Brown said chefs in mid-range restaurants were innovating by preparing dishes like temperature-controlled sous vide shanks or pulled product from shoulders.

A growing permanent NZ population and tourism helped sustain demand, although lamb wasn’t necessarily a novelty for visitors and new immigrants, he said.

Chinese eat their own home-grown lamb in hotpots and might have NZ lamb once a year. Alliance Group was trying to market lamb, in NZ and abroad, to middle-aged Chinese with concern for safe, naturally produced food.

“There’s ongoing work in that space and what we’d like to see (in China) is more western-style restaurants opening up on the back of the experience the tourists are taking home with them.”

Max Shen, a consultant for the industry’s redmeat marketing company, Beef and Lamb NZ Inc, said some Kiwi-style restaurants in Auckland reported up to 80% of their diners were Chinese visitors.

Lamb leg seemed popular although one Chinese butcher shop told him they sold lamb belly or shoulder and didn’t sell lamb racks. Chinese visitors were generally keen to try Kiwi food although thinner cuts remained a staple in hotpot shops, Shen said.