Lamb prices in the two major sheep meat producing countries in the Southern Hemisphere, New Zealand and Australia, have direct consequences for the industry in the UK. Not only are they the largest suppliers of lamb onto the UK market, but they are also the two largest competitors to UK exports on the global market.
New Zealand lamb slaughterings in the first five months of their 2015/16 season, beginning October 2015, were down by three per cent, following the smallest lamb crop recorded in New Zealand for over 60 years.
Despite this, slaughtering was actually up in the first three months of the season. This was due to dry conditions leading to the slaughter schedule being brought forward. As numbers began to get tighter, slaughterings declined, leading to lower levels of production.
The higher level of slaughterings in the early part of the season led to prices declining earlier and more sharply than is normally seen at that time of the season. Prices at the beginning of 2016 fell to their lowest level since 2013, where they have remained since then. During March prices began to rise marginally as supplies tightened. Prices are expected to continue to rise following their normal seasonal pattern as supplies tighten.
In Australia, the second largest supplier of sheep meat to the UK, prices so far in 2016 have been very similar to 2015. This is despite a six per cent rise in the number slaughterings, compared to the previous year, in the first two months of 2016. Slaughterings have been up due to drier than expected conditions in those months. However, for 2016 as a whole, forecasts for Australian production have been revised upwards, with production in 2016 now expected to be three per cent lower than 2015, compared to the six per cent previously forecast.
The upwards revision still forecasts a decline in lamb production in Australia in 2016 as a whole. With production in the first two months being up, this suggests that supplies will tighten as we move through the year. This, combined with good export prices and suggestions that production from New Zealand will slow as we move through the year, have led prices to remain at last year’s levels despite the higher levels of production.