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ASB tips lamb prices to rise

NZ NewswireNZ Newswire 23/05/2016 Tina Morrison
Lambs wool prices are on the increase. © Getty Images Lambs wool prices are on the increase.

New Zealand lamb prices which are trading at a three-year low, may rise 10 per cent next season, ASB Bank says.

Lamb prices averaged just above $5 per kilogram between October and mid-May, the lowest level since the drought impacted 2012/13 season.

It came as early lamb processing saw a large percentage of the meat sold into a weakening frozen export market, and as China and the UK processed more of their own flocks.

ASB Bank expects prices to lift at least 50 cents a kilogram next season starting in October.

The first signs of a lift may have emerged, with prices spiking 4.5 per cent in New Zealand dollar terms over a week, drawing level with the same time a year earlier, according to ASB's latest New Zealand Commodity Price Indices.

An agreement with China to allow future trade in higher value New Zealand chilled meat exports, a slowdown in China's pace of slaughtering its own flock, and reduced supplies in New Zealand and Australia due to a lower sheep flock are all boosting sentiment, ASB says.

"I think that the combination should help lamb prices eclipse last season quite comfortably," said ASB rural economist Nathan Penny.

"It's potentially good news for sheep farmers and their cash flows over the season ahead. It gives them a little bit more confidence to make decisions on the basis of prices lifting higher than this season."

New Zealand export lamb production is expected to fall 7.8 per cent to 19.6 million in the season ending September 30, 2016, according to the mid-season update published by Beef + Lamb New Zealand Economic Service in March.

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