The total number of New Zealand (NZ) sheep decreased by 2.3% y-o-y in H1 2020, due to a severe drought in the country. As a result, Mintec lamb prices in NZ exhibited a trend reversal since May and increased by 9% between mid-May and 7th October 2020 to NZD 7/kg. Higher export demand also supported the price increase as COVID-19 related lockdown restrictions eased globally.
The severe drought affected grass growth in NZ, which resulted in feed shortage and forced the NZ farmers to de-stock sheep. The largest reduction was in the number of hoggets, which fell by 8% y-o-y between January and June 2020. The number of breeding ewes remained similar to the previous year. However, ewe condition during mating was poor and ewe pregnancy scanning results were 5-10% lower, due to dry conditions and feed shortages. Consequently, the total sheep number in 2020 is estimated to drop by 4% to 22.28m heads.
Furthermore, the de-stocking of younger animals in 2020 will result in lower sheep stocks in 2021, adding upward pressure to NZ lamb prices. The hotter temperatures observed in spring 2020 (till 2nd week of October) are not likely to support the pasture growth, another factor underpinning the sheep output in 2021. Rainfall in the upcoming months and soil moisture content would be vital drivers for the grass growth.
New Zealand / Sep, Oct (week-1) and Oct (week-2) 2020 / Max. temperature (anomaly)
Sep 2020 Oct (week-1) 2020 Oct (week-2) 2020
Source: Mintec Analytics
Overall, New Zealand lamb prices are expected to continue its upward momentum in the next three to six months. Lesser availability of lamb crop, an increase in production cost due to feed/forage shortage and robust exports demand would be the main factors contributing to higher prices.