Sheepmeat

Demand and supply will keep sheep and lamb prices up

Sheep Central, February 11, 2020

AUSTRALIAN lamb exports are forecast to break records again due to robust international demand, Meat & Livestock Australia said today.

In its 2020 Sheep Industry Projections, MLA said continued strong demand, limited international competition and a forecast drop in sheep and lamb supply is expected to see prices remain at historically high levels.

And despite the decline in the nation flock and in lamb slaughter this year, higher average carcase weights from more supplementary feeding is expected to keep production stable in 2020. However, this is not expected to apply for mutton.

Lamb and mutton prices to stay historically high

MLA said lamb prices are expected to remain at historically high levels in 2020. Similarly, mutton prices, on the back of strong demand, limited international competition and an expected drop in supply next year, should see continued price support at or above recent levels.

The national flock underwent a significant decline in 2019 as breeding ewes continued to be offloaded and marking rates were negatively affected by ongoing drought in many key sheep production regions, MLA said.

MLA senior market analyst, Adam Cheetham, said the national flock is forecast to fall 3.5 percent to 63.7 million head by June 2020, representing the lowest national flock since 1904 and a cumulative fall of 12pc since June 2017, prior to the latest drought.

“The impact and severity of consecutive drought years will be felt across both sheep and lamb supply in 2020 and for a number of years to come.

“Sheep slaughter is forecast to decline 22pc to 7.2 million head in 2020 and lamb slaughter is anticipated to decline to 21 million head, which is 8pc below the pre-drought peak in 2016,” Mr Cheetham said.

“This reflects the impact of the diminished breeding flock, generally lower marking rates and the expectation of greater retention of ewe lambs on-farm.”

Rainfall could drop mutton production further

Despite the poor conditions, average national carcase weights improved in 2019 and are anticipated to do so again in 2020, helping to offset the impact of reduced slaughter on sheep meat production.

“Lamb carcase weights are forecast to rise 2pc to 23.8kg/head in 2020.

“This is due to the growing prevalence of supplementary feeding or lot feeding lambs, improved pasture availability and strong price incentives to feed lambs to heavier finished weights,” Mr Cheetham said.

“As a result, lamb production is forecast to remain stable at 500,000 tonnes carcase weight, despite a decline in slaughter.

“The impact of the decrease in sheep slaughter will not be offset by the expected increase in sheep carcase weights of 2pc to 24.7kg/head, with mutton production forecast to fall 21pc to 178,000 tonnes cwt.”

Mr Cheetham said production could fall further if average to above-average rainfall is experienced in the southern sheep production regions in the first half of 2020, as producers look to rebuild.

Strong global demand to continue

Looking at exports, Mr Cheetham said global markets continue to reflect strong demand and constrained supplies from Australia and New Zealand, the two dominant sheep meat exporters.

“The environment through 2020 is expected to remain much the same, supporting prices, but uncertainty regarding global trade policy and China’s appetite for meat imports due to African Swine Fever and coronavirus should not be disregarded,” Mr Cheetham said.

“Broadly, global demand for quality sheep meat has outstripped supply in recent years, leading to prices across all major sheep meat suppliers reaching new highs.

“Australian lamb exports are forecast to break records again on the back of this robust international demand combined with a soft Australian dollar. They are expected to lift 2pc to 288,000 tonnes shipped weight, supported by higher carcase weights and a greater portion of product entering export markets.

“Mutton shipments are forecast to decline 22pc to 143,000 tonnes.”

Click here to read MLA’s 2020 Sheep Industry Projections or visit the Prices & Markets section of MLA’s website: https://www.mla.com.au/prices-markets/Trends-analysis/

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