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Lamb prices of $9-$10 a kilogram coming for Australian farmers – Norton

by Terry Sim, 06 July 2018

MLA managing director Richard Norton

QUALITY lamb would return Australian producers $9-$10 a kilogram carcase weight within five years, Meat & Livestock Australia managing director Richard Norton told the Australian Intercollegiate Meat Judging Conference at Charles Sturt University’s Wagga Wagga campus this week.

But he highlighted the need for Australia to capitalise on the growing world lamb and sheep meat demand, the impact of increasing European market access, on-farm efficiency and meeting consumer expectations.

“My context was that as the middle class through Asia becomes more affluent that I do see Australian lamb within the next five years, consistently making $9-$10 a kilogram carcase weight,” told Sheep Central after his presentation.

He said there was a strong domestic market for lamb, only one percent of US consumers ate lamb and the Middle East was taking Australia’s light lambs.

“But we’ve never really thought about what the South East Asian economies could do for lamb, with the Japanese economy recovering and the South Korean economy going quite well…. and then you add the rising middle class in China to it seeking out more Western-type cuisines.

“Add to that a better free trade agreement through Europe – I reckon the statement I’ve made of $9-$10 consistently as an over-the-hook price for lamb is one of the safer things I’ve said.”

On supply, Mr Norton said China is eating its own flock and Middle East demand is extremely strong.

“Demand is certainly outstripping supply and for the foreseeable future it is going to be that way for 3-5 years.

“So talking to an audience of young uni students wanting to understand where there industry is going to be in 3-5 years, I’ve said the lamb and sheep meat industry is the success story of agriculture,” he said.

“There is nothing in the next 3-5 years barring a catastrophe or a world war that doesn’t see it having a very bright future.”

Mr Norton said although the last global financial crisis affected wool demand and prices, it had less impact on food products.

“In the food side of the global financial crisis, agriculture came out of it pretty well at the farmgate.”

He said global tariffs are increasing food inflation, making food more expensive, similar to the cycle preceding the last GFC.

Lamb price movements support demand story

When Mr Norton addressed the ICMJ competitors on Wednesday, the main National Livestock Reporting Service trade lamb indicator had just risen 9 cents to 721c/kg and the heavy lamb indice was up 10 cents to 722c/kg. Trade and export weight lambs had sold at the Wagga saleyards the day before at up to 800c/kg cwt and light export lambs have made over 800c/kg.

The trade lamb indicator rose another 5 cents to 726c/kg on Wednesday, although it tanked 11 cents to 715c/kg yesterday. However, the heavy export lamb indicator lifted to 725c/kg on Wednesday and another 10 cents to 735c/kg yesterday.

“Just coming back from South Korea which is now our fourth largest destination for lamb and five years ago it wasn’t even on the radar.

“So I’m saying as economies grow and seek out different foods, and in those nations eating out is just a part of their culture, when you introduce new foods, there is a boom in it.

Mr Norton mentioned the Lambassador campaign by MLA with celebrity chefs in Japan, where there were new restaurants opening up and just serving lamb.

“Then you look at China that imports nearly as much Australian lamb as it does Australian beef.”

Mr Norton said for Australia to capitalise on the current and future demand for sheep meat the industry had to ensure that every ewe was producing to its maximum capacity, “so we can capitalise on at the farmgate what is a very bright future for lamb and sheep meat”.

Transparency and eating quality needed for a $10 lamb

Mr Norton said eating quality classification would be critical to maximising the value of Australian lamb and sheep meat on domestic and export markets. And a $10 a kilogram lamb would need to be back by full eating quality specifications, including intra-muscular fat, as for beef.

“The most important person in this value chain is the consumer and their eating experience.”

It was also important that Australian producers did not break the trust of consumers on the issues of animal welfare and food supply chain transparency, he said.

“With a $10 a kilogram lamb comes complete transparency of how that lamb is raised – it’s a quid pro quo.

“I said you’ve got to understand that people want to have eyes and ears on your farm, because when they are paying that sort of money for it, they want to know or may have the expectation that it is conducted,” he said.

Referring to the animal welfare policies of European retail chains, Mr Norton said to expect the higher lamb prices up to $10 a kilogram Australian producers would have to understand consumer expectations at a higher level.

“Consumers in other markets have already made the comments, no mulesing of prime lambs and Sheep Producers of Australia have made their statements.

“But my commentary has moved on from mulesing, it’s about all surgical procedures conducted with pain relief – that’s the world that we are in,” Mr Norton said

MerinoLink model and the Merino is important

During his ICMJ presentation, Mr Norton mentioned the MerinoLink program which was using DNA to develop meat eating qualities and wool traits, and carcase attributes, by engaging producers who are matching Federal Government funds through the MLA Donor Company.

“Undoubtedly within five years’ time a lot of producers will be looking at specialised lamb production where they are turning off lambs at $10 a kilogram from ewes that have had twins and really pushing their production systems in that manner.

“And I think what we will see is the evolution of the dual purpose sheep – I think it would be madness if it was not from a Merino base,” he said.

“The Merino is just such an important part of this.

“If you can produce a lamb that is hitting the objective measures in eating quality from a ewe that is producing a $100 fleece each year, and your 20 kg lamb is making $200, that’s a $300 return from a ewe each year,” Mr Norton said.

“As with MerinoLink, you don’t have to worry about adoption when producers who are already paying the levy are putting their own money from their own pocket to fund research.

“Not only are they paying the levy for wool, sheep and lambs, they’ve put their money in their pocket to fund other research as well,” he said.

“Anyone who questions the status quo, which obviously I do, needs to consider models like this in the future.”

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