Lamb flap prices rise to a year high in June; beef, lamb leg stable

Tuesday 12th July 2016

New Zealand lamb flap prices rose to their highest level in a year, driven by increased demand from China where the meat is used in traditional hotpot dishes.

Lamb flap prices rose to US$4.40 per kilogram in June, up from US$4.05/kg in May and the highest level since the first week of June last year, according to AgriHQ's latest monthly sheep & beef report.

Chinese demand for lamb flaps has helped turn the offcut into a premium cut and lifted the overall return Kiwi farmers can get from their animals. The meat is processed into a lamb roll and sliced thinly for hotpot, the dominant cooking style for lamb and a staple of the Chinese national diet.

"The market which has been the most positive is China," AgriHQ analyst Reece Brick said in the report. "There is plenty of demand for protein across the country, and this has been reflected in flap prices gradually rising. However some market participants believe prices are nearing an equilibrium, which will limit further increases as the season progresses."

Meanwhile, the benchmark price of a leg of lamb in the UK was unchanged at 3.80 British pounds/kg in June from May, and was down from 3.90 pounds/kg a year earlier.

"The UK has been stagnant with domestic product enough to meet buyers' requirements," Brick said.

New Zealand lamb slaughter rates are decreasing, in line with the typical seasonal pattern for this time of year, and Australia, the other major lamb exporter, is also producing less lamb than a year ago, he said.

The price for US imported 95CL bull beef, the raw ingredient for meat patties, edged up to US$2.21 a pound in June, from US$2.14/lb in May but below US$2.42/lb a year earlier.

"The imported frozen beef market in the US has undergone a period of very stable pricing through June," Brick said. "Slaughter rates in New Zealand are declining as the later months of the season approach, while Australian beef production is also much weaker than only a year ago, keeping offerings to the market limited.

"While this limited supply has undoubtedly placed some upwards pressure on the market, interest from within the US hasn't been as serious as it was earlier in the season, keeping a lid on pricing."

Domestic supply in the US may be enough to meet buyers' needs in the short term, limiting demand for imports and keeping a lid on prices, he said.

Meat is New Zealand’s second-largest commodity export behind dairy, and was worth $6.64 billion in the year through May, according to data published by Statistics New Zealand.

BusinessDesk.co.nz

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