Chinese Demand Driving Better than Expected Exports of New Zealand Lamb and Mutton

According to data from Stats NZ, total lamb and mutton exports from New Zealand from October 2022 through March 2023 were at 203 thousand mt, up by 1.8% in year-over-year terms. These months represent the first half of the 2022-2023 export season, which runs from October of the previous year through September of the current year. Behind the increase is rising demand out of China and also a weaker New Zealand dollar on an annual basis, of which average during the period represented a depreciation of 10% against the US dollar in year-over-year terms.

According to China Customs, China imported a total of 101 thousand mt from October 2022 through March 2023, which represents an increase of 6% year-over-year. Underlying this increase was the removal of strict pandemic restrictions earlier in 2023.

The export numbers for the first half of the season seem to be outperforming initial expectations for 2023. In its Mid-Season Update report, released in March, Beef and Lamb New Zealand was expecting a combined lamb and mutton export volume decline of 2.9% for the 2022-2023 season. Behind this expectation were the low volumes experienced in the first months of the season. Indeed, cumulative exports during Oct-Dec 2022 were down by 4.6% year-over-year. Nonetheless, Jan-March 2023 cumulative exports (which were released later) were up by 6.8% year-over-year, more than offsetting the decline in the previous three months. March alone recorded a 16% YoY increase. As Chinese demand for meat remains strong in the upcoming months, it’s likely that New Zealand’s export volume of these products during the full 2022-2023 will end up with higher numbers compared to the past season.

Source: Tridge and Stats NZ

Yet, while volume has been moderately increasing, the exported value has been declining sharply due to lower prices. During H1 of the 2022-2023 season, the total exported value was NZD 1.996 billion, which represents a decline of 15% YoY. This is due to a fall in prices, which averaged NZD 9.80/kg, down 17% from the same period in the past season. Nonetheless, prices are set to recover in the upcoming months due to the aforementioned growth in demand. In fact, it has already started to play out, as the average export price in March was 6% higher than February’s, which was in itself a 2-year low.

A weaker New Zealand dollar will likely continue to support exports. While exchange rate movements are highly uncertain, current forward rates for the NZD/USD are indicating no appreciation for the New Zealand dollar in upcoming months A weaker New Zealand dollar incentivizes exports by allowing more inflow of the local currency for the same price in US dollars. On a seasonally-adjusted basis (New Zealand exports of lamb and mutton are highly seasonal), March’s increase in volume matched a decline in the NZD/USD rate.

Source: Tridge, Stats NZ and IMF data