Rain likely to reverse spring flush lamb price drop

According to ANZ's latest Agri Commodity Report, the extra green clip as a result of the rain could not only see sheep gaining extra condition, but could substantially reduce feed costs for farmers.

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"Apart from those in the middle of shearing, the good November rains were welcomed by most sheep producers," said Michael Whitehead, ANZ's Head of Food, Beverage andAgribusiness Insights.

"Coming on the edge of summer, the boost to feed growth will have many farmers looking over the next few months even more optimistically than they already were.

"Producers will already be crunching the numbers - potentially less supplementary feed needed later in summer, better condition for sheep heading to the saleyards over the coming months.

"Perhaps most notably, it may also spur many producers into having the confidence to hold their stock back from the markets for longer than originally planned, in the hope that prices will reverse their downward trend over the past month and start to rise again.

"In particular, lamb producers will also be looking to make the most of the new feed to add extra condition, and increase their saleyard returns."

The risk with this strategy is that if many in the industry follow the same path, a surge in quality lambs closer to Christmas could dampen prices, as buyers are faced with ample supply, the ANZ report warned.

"The good spring rain also had the impact of bringing restockers back to sheep markets, many of whom may have been lessening their buying activity on the expectation of feed drying out more quickly heading into summer," Mr Whitehead said.

"With current forecasts of the rain continuing at least into December, it appears likely that enough producers may take the opportunity to keep rebuilding their flocks, to put further upward pressure on prices."

While lamb prices are usually likely to fall at this time of year as a surge of spring lambs hit the market, this year however, heading into summer and 2022, the potential for a quick price recovery is strong.

"This is boosted by the consumer demand for lamb, likely to flow from a combination of the lifting of restrictions on restaurants and social gatherings, and the onset of the summer BBQ season," Mr Whitehead said.

"In terms of sheep meat exports, while these have seen recent declines, largely impacted by the rise in the Australian dollar, the fact that demand for NZ lamb has remained strong is a reassuring sign of ongoing demand, albeit impacted by price."

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