Lamb prices look set to take a hammering in our most important market after the New Zealand dollar reached a 25-year high against a weakening British pound late yesterday.
Sterling appears to be paying the price for doubts over the strength of the British economy, with the New Zealand dollar reaching 46.32p at 5pm yesterday.
The New Zealand dollar's rise could not be happening at a worse time for exporters, with it being the peak of the season and the United Kingdom our most important sheep meat market, accounting for 25% of our lamb exports.
However, Australia is our largest export market, and the New Zealand dollar fell to a nine-year low against the Australian dollar of A76.86c late on Tuesday after the Reserve Bank of Australia lifted official interest rates to 4%.
It recovered yesterday to close at 77.17c.
Bank of New Zealand strategist Mike Jones told NZPA the New Zealand dollar was close to finding a bottom against the Australian dollar, but said it was a sign the Australian economy was stronger than New Zealand's.
Meat and Wool Economic Service executive director Rob Davison said that since February last year the British pound had weakened 34% against the dollar.
To an exporter, this means while 100 of lamb cuts sold a year ago would have been worth $NZ287, today it would be worth $214, a drop of 25%.
Mr Davison said demand for New Zealand lamb remained high in the UK, with the pound's weakness against the euro encouraging UK farmers to export lamb to Europe.
Meanwhile, the New Zealand dollar was buffeted yesterday on the back of the Australian interest rate rise.
It briefly pushed higher to US69.89c against the United States greenback on news the Australian economy grew 0.9% in the fourth quarter, before being sold off to close at US69.71c.
