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Weak demand helps lift NZ lamb prices

NZ NewswireNZ Newswire 10/10/2016 Tina Morrison

New Zealand lamb meat prices advanced last month on lower supplies but analysts expect the uplift will be temporary due to weak demand in the UK market, where around two thirds of the country's lamb legs are exported.

The benchmark CKT price for a leg of lamb in the UK rose to 4.20 British pounds per kilogram in September, from 4.10 pounds/kg in August and 3.40 pounds/kg in September last year, according to AgriHQ data.

In New Zealand dollar terms, returns were $7.51/kg in September, from $7.41/kg in August, and compared with $8.04/kg a year earlier.

In New Zealand, the average price from local meat processors lifted to $5.80/kg, from $5.68/kg in August,and compared with $6.05/kg a year earlier, AgriHQ said.

New Zealand lamb numbers are forecast to decline this season after the number of breeding ewes fell 3.1 per cent last season, the 10th consecutive annual decline.

While the lower supply has bolstered prices in recent weeks, that's expected to ease once the main production period gets underway due to weak demand in the UK and as export returns are hurt by the elevated level of the kiwi dollar combined with a weak British pound.

"UK demand for New Zealand product is low, not helped by low consumer demand for lamb, which is priced much higher than alternate proteins such as chicken and pork," AgriHQ analysts Reece Brick and Shaye Lee said in their report.

Major supermarket chains in the UK have indicated they will be taking a step back from promoting chilled lamb this Christmas as they are unwilling to absorb the same losses generated in previous seasons, according to the report.

Meat is New Zealand's second-largest commodity export behind dairy products, and was worth $6.39 billion in the year through August, according to Statistics NZ data.

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