Lamb numbers up, but profits kneecapped by high dollar

Lamb numbers are showing some signs of recovery, and agricultural economists say this spring's record lambing percentage increased numbers by 6.2 percent.

Meat and Wool New Zealand's economic service says this year's lamb "crop" will be 28.9 million, up 1.7 million from the 51-year low experienced last spring.

The numbers are still well below the 32.8 million average of the decade to 2007, but economic service director Rob Davison said excellent spring lambing weather brought some recovery.

"This year's lambing percentage of 124 lambs born per 100 ewes was a record for the country and well up on last spring which had a drought-affected seven-year low of 113 lambs born per 100 ewes," he said.

Offsetting the improved lambing percentage was a drop in the breeding ewe flock of 3.6 percent due to drought and expansion of the dairy herd.

The number of lambs available for export is expected to rise by 1 million to 23.5 million, a 4.4 percent lift on last year. This number is still 6 percent below the average from 2001 to 2008.

Another remaining 700,000 lambs will be kept to replace older ewes in flocks.

But Mr Davison said that exchange rates for the NZ dollar were a concern.

Last year's lamb crop generated $2.8 billion in export receipts.

This year there was higher production and steady offshore market prices, but the current exchange rate was around 17 percent higher than last year.

"If exchange rates and export prices remained the same as last year, lamb would generate $2.9 billion in export receipts in 2009-10.

But if the current higher exchange rates prevail, lamb export receipts will reduce to $2.5 billion, a drop of $400 million despite lamb production increasing 3.5 percent," he said.

The ewe flock is now at its lowest level since the Korean War pushed up wool prices 57 years ago and spurred farmers to boost the size of their flocks.

Some farms in districts which tend to lamb later in spring were also hard-hit by cold as snow fell to low levels in October.

Lamb survey numbers collected by Meat and Wool NZ regional staff showed the North Island's ewe lambing percentage was 117.5 for each 100 ewes, up 12.7 percentage points on last year, but partly offset by a 3.3 percent reduction in breeding ewes.

"At 13.1 million, the North Island's total lamb numbers were up 1.1 million (9.2 percent) from 2008's drought-affected low," the economists said. "A total of 430,000 or 3.3 percent were lambs from hoggets".

The South Island's ewe lambing percentage was 129.1 percent, up 8.5 percentage points on 2008, also partly offset by a 3.8 percent drop in breeding ewe numbers.

At 15.8 million, the South Island's lamb numbers were up 6.2 percent on last year, and 540,000 lambs or 3.4 percent of the crop from hoggets (one-year-old sheep), which is an increase on last spring of 162,000.

The North Island export lamb slaughter will be up 4.8 percent to 10.6 million and the South Island export lamb slaughter is estimated to increase 4 percent to 12.9 million -- figures which are crucial to meatworks looking for sufficient throughput to remain profitable.

"We expect a small increase in the number of ewe lambs retained as replacements this year," Mr Davison said.

Last year farmers kept fewer replacements than normal because of the cold long winter, their need for cash, and high lamb prices later in the season.