Multi-decade low production drives New Zealand sheep meat exports to decline in volume, but value is still supported by strong prices

New Zealand sheep slaughter during October 2021 through March 2022, the first half of MY 2021/22, dropped to its lowest level for the same period since at least 1981/82, totalling 12.8 million head. This represents a decline of 13% compared to the same period in the previous year. Along similar lines, sheep meat production in the first half of MY 2021/22 declined to its lowest level for the same period since 1985/86, totalling 256k mt, down 14% compared to the previous year. According to Tridge representative in New Zealand, Breda van Niekerk, two of the main reasons behind the decline in production were drier weather than usual in the last summer-autumn season, reflecting on less pasture, and ongoing labor shortages due to Covid.

Source: Tridge, Statistics New Zealand

At the same time, according to UN trade data, New Zealand sheep meat exports in terms of volume, during October 2021-March 2022 dropped by 13% YoY to 202k mt. The loss is mostly due to a 25% YoY decline in exports to China. Exports to the UK, New Zealand's second largest export market, declined by 7%. The losses more than offset gains in exports to Malaysia, which rose by 139% YoY, the US, which rose 18% YoY, the Netherlands, up by 31% YoY, and Saudi Arabia, up by 77% YoY.

However, in terms of value, total sheep meat exports from New Zealand during the first half of MY 2021/22 rose by 8% YoY to $1.63 billion. The average export value rose 25% YoY to $8.12 per kg.

It’s worth noting that, among the three largest importers of New Zealand sheep meat, the YoY decline or increase in volume during H1 MY 2021/22 corresponds to the increase in the average value/kg in each country. For example, in China, where the average value/kg only rose 14% YoY, exported volume had the sharpest decline, while in the US, where the average value/kg rose by 38% YoY, exported volume had the sharpest increase. This also reflects the difference in individual sheep meat products demanded by each country. In its whole imports mix, China demanded a larger proportion of lower-value items compared to the other countries, while the US imported a larger proportion of higher-value items. This also suggests that exports were more heavily marketed to where consumers were valuing them more.

Source: Tridge, UN Comtrade

According to Beef+Lamb New Zealand, total sheep meat export value in NZD during the full 2021/22 season, October 2021 through September 2022, is expected to increase 11.9% YoY, as the projected increase in value/kg is expected to more than offset a decline in volume, which is forecast to be down 1.5% YoY. These numbers suggest that exported volume will increase during the second half of the season, which runs from April through September 2022, by roughly 15% YoY. In terms of average value/kg, we should expect a slight decline of 3% YoY during H2 MY 2021/22. So, for these expectations to match what actually happens, the following must occur:

• Sheep meat production during H2 2021/22 season must increase YoY, and the challenge of labor shortages must be circumvented

• China’s demand should remain strong

• US demand should keep its pace, despite inflationary pressures on consumers

For more on sheep meat prices, production, and trade data, please visit Tridge.