August 2021

So lots of grass everywhere, and prices for both lamb, culls and stores remain high. Some additional macro thoughts as to what is driving this, as it will clearly have implications as to the prices of top quality breeding stock, and as to whether these pricing pressures are short term?

We have all noted that domestic demand post lockdown has been very strong even before restaurants and hotels etc reopen properly. But it is the relative decline in imports that is also an important factor. Regardless of the magnitude of continued high Chinese demand for Ausie/NZ sheep meat, it is the cost of shipping that has sky rocketed, and this is an important factor when shipping chilled meat to Europe/UK.

I highlight an interesting assessment on this from a marine specialist investment manager:

“The big liner companies are chartering ships at current (very high) charter rates for five-year terms in order to secure tonnage. This illustrates a significant level of confidence. Supermarket firms are chartering ships themselves in order to ensure certainty of supply. The new ships ordered will, as you say, take at least two years to come through. The dry bulk [ship] market is constrained (as to new orders) because of perceived technology risk. Shipowners don’t know what the fuel of the future will be and what propulsion/ fuel storage systems will be required to meet decarbonisation goals. Despite tightening regulation (and impending carbon pricing), this disincentive to invest, exacerbated by rapidly rising steel prices and thus ship prices, fuels the continued strength in the freight market, even without extraordinary growth projections for commodity markets.

Expect this situation to be long-lived”.

If this assessment is anything near right, this has implications for all of us.

As I mentioned above, we like everyone else have lots of grass and our shearlings are looking really well. Remember we do not feed any of our stock. The rams will start getting access to buckets today (but no corn) so that they will be ready for tupping in a couple of months. As and when you get on top of harvesting come and have a look!