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Lamb prices on a knife edge

New season lambs on Masterton’s Chamberlain Rd on Wednesday. PHOTO/STEVE RENDLE

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Record high lamb prices have farmers licking their lips but Federated Farmers Wairarapa president William Beetham is wary of what the future will hold for the prices of new season lambs next year.

But he said the real concern was farmers’ attitudes towards marketing their stock.

The lamb schedule has reached record highs in recent months, but the schedule’s value was not a fair reflection of the export market value of the meat, he said.

Lamb processors continued to pay top dollar for lambs, however Beetham questioned how long that would last.

Processors’ ever-tightening margins might limit just how much higher prices could go, according to Rabobank’s latest Agribusiness Monthly report.

New season lambs traditionally come on the market in November and December, but Beetham was more concerned about what the prices would be during the first months of next year.

“Processors may have to pull back the schedule to try and gain bigger margins in the summer when there is a larger flow of stock. This would be to try and recoup any losses they incur now.

“This could put a lot of the lamb prices next summer at risk.”

Farmgate lambs weighing 17.5kg are fetching $143.50 a head, up from $119 at the same time last year, according to last week’s AgriHQ’s North Island schedule.

Lambs weighing 19kg are fetching $155.80 a head, up from $129.20 last year.

When lamb prices reached this level, farmers tended to think about the money on the day, rather than making marketing decisions based on what could be positive long-term effects for their businesses and the industry, Beetham said.

The fluctuations in prices were playing out in a more extreme way than the industry had seen in the past, he said.

“We have got to look back over the last 10 months when the store lamb price was down as low as $1.80 per kg, now that’s sitting at $4.20 per kg.

“The last time we saw high prices like this, we saw massive inventories of lamb and then we saw a massive market crash,” he said.

Beetham is involved in a producer group that works with store and finishing farmers who agree on secured lines of lambs ahead of time with prices already agreed.

He said this was a way that farmers could become more connected with the market and reduce risk in their business.

“This is the idea of changing the way we think to prevent these big fluctuations in prices, which don’t reflect the value in the market.”

Beetham said this had been an industry concern for the past decade.

These price increases in the lamb schedule could drive consumers away from buying the high-value protein, Beetham said.

PGG Wrightson area livestock manager Steve Wilkinson agreed that while the outlook for the new season was looking positive, there was a lot to happen between now and then.

“[Farmers] don’t want a situation where the price goes too high now and then losses have to be recouped when they are marketing their own lambs,” he said.

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