Lamb flap prices jump to 18-month high on Chinese New Year demand

Lamb flap prices jumped to their highest level in a year and a half, driven by increased demand from China where buyers are stocking up for New Year celebrations.

The price for lamb flaps rose to $US4.70 per kilogram in October, up from $US3.80/kg for the same period a year earlier, according to AgriHQ's latest monthly sheep & beef report. That's the highest level recorded by AgriHQ's since April 2015.

Lamb flaps are popular in China for use in traditional hotpot dishes, and traders are buying the meat now to ensure it can be shipped to China in time for New Year's celebrations starting in late January and to cover demand for the ensuing holiday period. Also known as the 'spring festival', the Chinese New Year falls on January 28 in 2017, ahead of 2016 when it was celebrated on February 8.

"The earlier than usual Chinese New Year is underpinning the market, pushing prices to a positive level for this point in the year," AgriHQ analysts Reece Brick and Shaye Lee said in their report. "How the market responds once the cut-off for the Chinese New Year is uncertain but there is a belief that the current level will be hard to sustain in the medium term."

Meanwhile, the benchmark price of a leg of lamb in the UK gained to £4.35 per kilogram in October from £4.20 a kilogram in September and £3.40 a year earlier.

However, AgriHQ said the weaker UK currency since the Brexit vote is damaging returns for New Zealand exporters, with the kiwi currency 37% higher than this time last year.

"The UK lamb market appears increasingly likely to cause issues for New Zealand exporters in the coming months," the analysts said in their report. "UK buyers have shown little to indicate they will absorb the eventual increase in volumes as new season production increase without some downwards movement in prices."

Meat processors were looking for alternative avenues to divert lamb legs into and the next few weeks are expected to provide a clearer indication around how much weaker leg values will be, according to the report.

The price for US imported 95CL bull beef, the raw ingredient for meat patties, edged up to $US2.10 a pound, from $US2.02/lb the previous month and $US2.09/lb a year earlier.

"Low imported beef volumes were not enough to counter a lack of interest from buyers through the early weeks of October," AgriHQ said. "This extended period of limited buying has meant some now find themselves a little short-stocked on product, causing an increase in competition for imported product.'

However, the analysts said there is little confidence that the lift will be sustained in coming weeks.

Meat is New Zealand's second-largest commodity export product behind dairy, and was worth $6.24 billion in the year through September, according to data published by Statistics New Zealand.

(BusinessDesk)