[This post was published online on 7 August at http://www.stuff.co.nz and also in most of the FairfaxNZ newspapers]
This year has been an exceptional year for many sheep farmers. Lamb and mutton prices have been at record levels.
The key drivers have been increasing demand from China combined with lower exchange rates. Sales to Britain have slowed down, linked to a ‘buy British’ campaign over there. But that has not been enough to counter the overall good news story.
Sheep farmers are telling me that, for the first time in many years, sheep farming is fun again. The cash is coming through to upgrade tracks and other infrastructure. Venison prices have also been exceptional for those sheep farmers who also farm deer. Most sheep farmers also run beef cattle and they too have been paying well.
With all the stars aligning so well, sheep farmers can look with sympathy at their dairy farmer mates. Actually, dairy prices are also better than average. But dairy farmers have so many other things to worry about, including high debt, the risks of Mycoplasma bovis, and an urban population that has disconnected with the dairy industry. So dairy farmers are not happy, unlike their sheep farmer cousins.
There is always a danger when things are going well, that business folk including farmers take their foot of the pedal or their eye off the road. To mix the metaphors, it won’t all be straight sailing in the years ahead.
One reason that lamb and mutton prices are so good is that the supply has been in decline. Indeed, the current New Zealand total of 27 million sheep is less than half what we had some thirty years ago. That decline has been driven by conversion of sheep land to dairying, particularly in the South Island, and conversion of marginal North Island sheep country into forestry or in some cases reversion to scrub.
The remaining sheep farms are much more productive than in the past. For example, lambing percentage has risen 20 percent in the last 20 years. Also, lamb carcass weights are up 50 percent over the last 40 years. This has made for a much more efficient industry. Don’t let anyone ever tell you that sheep farmers are not innovative!
Back in the 1950s and 1960s when the New Zealand economy really did operate off the sheep’s back, it was wool and meat as co-products that kept things running. Since then, it has been a long and inexorable decline for wool, largely due to failure to meet the challenge from synthetics.
In contrast, the long-term trend for lamb and mutton prices has been upward at well above the rate of inflation. So someone must have been doing something right.
Back in the 1960s, and for the preceding hundred years, sheep meats were the dominant meat consumed in New Zealand. The local preference was for ‘hogget’ which is the quaint term for yearling sheep. In contrast, the sheep meat sent to Britain was mainly light-weight lamb, slaughtered at three to six months of age. For mutton from older sheep, it was sometimes put on the menu as ‘colonial goose’.
Way back then there was no KFC nor was there a McDonalds. Even in the 1970s, it was a special event to have a beef steak.
All of the changes that have occurred since then should remind us that the future is also going to be very different to now. In my lecturing days, I would sometimes share a laugh with my students as to the quaint lives we used to live when I was a student – no doubt to them it seemed almost prehistoric. I would then make the point that in another thirty years or so, those of us still around will look back to what we are doing today with equal amusement.
So what will our sheep industry look like in ten and twenty years time? As Mark Twain supposedly said, prediction is difficult, particularly when it relates to the future. However, some things are evident.
The first point is that Europe does not need us, except perhaps to fill in some seasonal gaps.
The second point is that the American markets are there for us to develop. After the Second World War, the USA had 50 million sheep, but now there are no more than six million. So whatever American markets we develop, the only competition we might face is from Australia.
The third point is that China is already our most important market by volume. In particular, it is the only big market that is interested in mutton from the old ewes. However, China has also become very important for lamb.
The Chinese market has potential to become even more important in future. I have been studying the China markets and their own sheep industry for many years, but that is a story for another day.