Photo: RNZ/ Sally Murphy
Farmers struggling with low prices for lamb could lead to land use change with more planting trees, an agricultural consultant says.
Two years ago, lambs were worth an average of $160 a head. Since then, they have plunged nearly 30 percent, while farmers' costs have increased 20 to 30 percent.
The drop is being put down to continued soft demand from key markets like China, as well as an influx of Australian lamb flooding markets.
AgriHQ's latest market update said it had been yet another week where little had changed for either lamb or mutton schedules.
Senior analyst Mel Croad said lambs were going through processing plants quicker than they did earlier in the year. It was enough to cause wait times at the odd plant but it had not been enough to push processors to change prices.
Most companies are paying $6-$6.30 per kilogram in the North Island and $5.80-$6.05 per kg in the South Island, while mutton was sitting at $2.60-$2.80 per kg, she said.
Croad said the forward outlook for export markets was relatively pessimistic.
"China is holding for now but is expected to go backwards a little before we start to see anything resembling a recovery."
She said the Middle East was slowing too, which was not much of a shock considering it bought up big in the lead-up to Ramadan, which ended earlier this week.
"The US, UK and mainland Europe are taking over well enough for the time being."
AgFirst's Phil Tither, who has clients in both the North and South Island, said virtually none of his sheep and beef farmers were making money.
He said it was entirely unsustainable, because it was meat, not wool, that would make farmers money.
"If I reflect on a farm I was working on today, a couple seasons ago their operating costs were around 60 percent of their revenue, which means quiet a good level of profitability generated where as this season they're not going to break even.
"There's hardly any sheep and beef farmers breaking even, that's a major shift on a couple years ago."
Tither said as a result, some farmers would drop sheep numbers in preference for cattle, or plant trees.
"It's more about marginal change, some farms that have been at 60 percent sheep and 40 percent cattle will move to 50-50.
"Then there will be farmers who completely drop sheep and do something else, it might be cattle but it might also be pine trees, that's a land use many will consider."
Tither said one small positive was lamb prices, while low, had stayed the same for the past three months, when normally they would drop between Christmas and now - so they had at least held some ground.
