Exchange Rate Hits New Zealand

Exchange Rate Hits New Zealand


New Zealand farmers hoping for a windfall, due to a limited supply of lamb this season, may be left disappointed as the rising New Zealand dollar has hit prices.

The supply of lamb dropped last season as farmers looked to deal with drought conditions. According to Beef + Lamb New Zealand, the supply is expected to decline again this spring and drop by 2.9 percent to 23.3 million (m). It was also reported that slaughter rates hit an all-time low in the four weeks to early August, with less than 560,000 lambs processed, a decline of 34 percent on last year.

According to AgriHQ data, the benchmark CKT price for a leg of lamb in the U.K. rose to £4.10 per kilogram in August, from £4.05/kg in July and £3.40/kg in August last year.

However, the prices are being impacted by the rising New Zealand dollar, making exports less lucrative to overseas customers. Returns declined to NZ$7.41/kg in August, from NZ$7.53/kg in July, and NZ$8.35/kg a year earlier.

The New Zealand dollar traded at 72.92 U.S. cents, up from 67 cents at the start of the year and 62.55 cents this time in 2015. It recently traded at 54.86 British pence, up from 46.40 pence at the start of the year and 40.96 pence a year ago.

In an AgriHQ report on the lamb industry, analysts Reece Brick and Shaye Lee outlined the impacts on the market.

“Two key factors are influencing the international lamb scene: limited supply and exchange rate movements,” they wrote. “While inmarket returns for various cuts of lambs have increased recently, much of the gains made in this area have been lost in NZ dollar returns, as exchange rates continue to hold well above what was observed only three months ago.

“Early expectations are for similar results to last year, as lower supply expectations should at least partially offset currency movements,” they added. © William Reed Business Media SAS 2016

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