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March 28, 2013

 

New Zealand's red meat production rises due to drought
 

 

Due to an overextended period of dry weather, New Zealand lamb production has found itself in a similar position to much of Australia, as its recent data shows that weekly North slaughter is at its highest level in 25 years, but at carcase weights lower than any March since 2008.

 

In comparison, South Island growing conditions have been better, with reports of higher average carcase weights, and in some cases lambs being traded south for finishing. However, processing has also started to rise in the past couple of weeks as dry conditions take their toll on feed availability. There is recognition in New Zealand that the large volume of lamb being shipped to China is a key factor supporting the market, as China has stepped up its buying significantly in the past few months, absorbing additional supply for prices averaging 27% lower than the same time last year.

 

The attached chart shows the pattern New Zealand lamb slaughter would follow this season if it had the same average monthly proportions from the last five years against the actual slaughter for the first five months of the season (the NZ processing season runs from October-September).

 

While there is the strong possibility of a shortage of lamb out of New Zealand later in the winter, that is usually a tight period for New Zealand anyway. In addition, Australia is currently in a tough dry spell, with very high turnoff through summer and expectations of some difficulties sourcing stock in some areas in late winter. This may reduce Australian producers' opportunities to take advantage of potentially higher prices in winter.

 

The increased throughput in New Zealand has not just been limited to lamb, with New Zealand beef production also surging, as beef and dairy producers also struggle with drought conditions. New Zealand total cattle slaughter has averaged 52% above levels a year ago, which is also premature to the normal cull season in April and May. The higher New Zealand beef production has been registered in a sharp increase in exports for the first few months of 2013, especially to the US and China.

 

New Zealand beef exports to the US have shot up 29% in February compared to January, and saw an 11% increase on the same period last year. New Zealand exports to China have also increased substantially throughout the drought, to 4,429 tonnes swt in February.

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