MLA says domestic and export lamb sales are booming

Sheep Central, September 8, 2023

DOMESTIC lamb consumption has increased on the back of lower prices to producers and exports are at record year-on-year levels, Meat & Livestock Australia has reported.

MLA said Australian shoppers are increasingly putting red meat in their trolley as retail prices push back against the inflation trend being seen more generally at the supermarket checkout.

Throughout this year livestock prices for cattle and sheep have declined significantly following historic highs in 2022, MLA said.

While livestock prices have decreased this year, MLA said the reduction in average retail price of red meat lags prices paid to producers by about eight months. This is due to the amount of supply available, demand for Australian red meat in export markets, and rising input costs through the value chain, the research, development and marketing body said.

In the previous 12 weeks to 13 August 2023, retail prices for beef and lamb have declined significantly, following a trend that’s continued throughout 2023, demonstrating that the fall in livestock prices has started to impact the price paid at the checkout.

Retail prices and demand

The performance of Australian lamb and beef in the domestic market remains solid, with both proteins growing in sales volume and overall value. When comparing the last quarter with the same period last year, value growth for beef is 1.8 percent and for lamb is 4.2pc, MLA said.

Data from NielsenIQ HomeScan shows a 7.3pc reduction in the price consumers are paying for lamb compared to a year ago, which is supporting a 12.4pc increase in volume of lamb purchased at the cash register.

MLA’s general manager of marketing and insights Nathan Low said lamb has seen a boom in purchases in recent months, as consumers notice its falling price and jump on the opportunity to purchase a high quality and nutritious protein.

“The price reduction is translating to increased purchasing frequency for several cuts.

“This is especially the case for the most popular cuts like lamb legs and chops, which are up 20pc compared to one year ago,” he said.

“Consumers see these price reductions and purchase more as a result.

“As this happens, retailers are looking to bring in customers with competitive pricing through catalogue promotions, and increased stock on the shelf,” Mr Low said.

For beef, NielsenIQ is reporting 7.1pc growth in volume in the last quarter, compared to the same period last year, with an average retail price decrease of 4.9pc. Frequency of purchase and volume per purchase are both up in the latest quarter as well, MLA said.

“Consumer perception of beef and lamb is strong,” Mr Low said.

“Tracking by Kantar, commissioned by MLA on behalf of industry, said that consumers see both beef and lamb as increasingly worth paying more for due to their high quality and taste.”

Relationship between livestock and retail meat prices

MLA said that historically, data on supply, pricing and consumer demand shows that it takes about eight months for livestock prices to translate to the retail shelf. The last time in recent history that beef prices dropped considerably was in 2012, with the lag to shelf arriving eight months later, with those lower prices remaining for about nine months.

For lamb, which has seen a drop in prices in the fourth quarter of the calendar year every year since 2018, it experienced significant price drops in 2012-13 and 2016-2018, MLA said. Correspondingly at this time, retail pricing took about nine months to fall.

According to Mr Low, there are a variety of factors that drive pricing in the retail market, as well as additional supply chain pressures occurring currently.

“Livestock prices are only one component of retail meat prices,” he said. “Producing retail meat requires investment in energy costs, transport and freight costs, labour costs, packaging and disposal costs, retailer margins, processor margins, PPE and hygiene, all of which have increased in price over the last year, along with almost everything else.”

“This is important to remember when considering when livestock prices increased as they did to historical highs last year. When saleyard prices were at those highs a year ago, retail prices increased but not at the same rate.”

“What we are seeing now is that same trend, just in the opposite direction. Consumers need a degree of certainty for their shopping basket and retailers smooth the retail pricing impact over the longer term, rather than sharply increase or decrease the price of meat in accordance with livestock prices.”

Lamb exports highest on record

MLA today said that lamb exports grew 21pc year-on-year to 31,779 tonnes, the highest on record. Beef exports rose by 11% YoY to 102,352 tonnes, while mutton exports rose by 29pc YoY to 15,856 tonnes.

China was the largest market for Australian red meat exports in August, taking in 37,528 tonnes.

MLA said 31,779 tonnes of Australian lamb were exported in August, 21pc more than August 2022 and the highest monthly export volume on record.

Beef exports were at their highest since 2019, mutton exports increased by 29pc YoY and goat exports rose by 22pc to 2,855 tonnes, the strongest August since 2014.

MLA said the largest market for Australian lamb in August was China, where exports rose by 47pc YoY to 7,310 tonnes. At the same time, exports to the United States eased by 10pc YoY to 6,397 tonnes, remaining the second largest lamb export market, as it has all year.

Substantial growth occurred in exports to the UK, where YoY volumes rose by 174pc to 1,045 tonnes.

While still relatively small, the substantial increase suggests that exporters are taking advantage of opportunities presented by the enactment of the Australia-UK Free Trade Agreement, MLA said.

Lamb exports have already totalled 205,111 tonnes this year, seeing a 10pc increase to the same period in 2022, a year in which exports hit a historic high. The increase in exports suggests that Australia is set to break lamb export records again, MLA said.

Between 2018 and 2022, in a calendar year around 64pc of sheep meat exports occur between January and August. So far this year, 275,508 tonnes of sheep meat have been exported.

In the July sheep projections update, MLA forecasted total sheep meat exports for the year at 462,000 tonnes, and year-to-August exports are currently 73pc of that figure, suggesting that sheep meat exports are running ahead of expectations.

MLA said in the same way, between 2018 and 2022, around 64pc of beef exports occur between January and August this year, 678,038 tonnes of beef have been exported – around 64pc of the 1.06 million tonnes forecast in the June cattle projections update, which suggests that beef exports are more or less on track.

Beef exports up 11pc year-on-year

MLA said 102,352 tonnes of beef were exported in August, an 11pc increase YoY and the highest monthly export volume since December 2019.

Very large volume increases occurred in exports to North America. Exports to the United States rose by 71pc YoY to 25,760 tonnes, while exports to Canada rose a remarkable 669pc YoY to 3,122 tonnes. MLA said the ongoing US herd destock has led to lower domestic US slaughter numbers, driving demand for Australian beef to maintain consistent supply.

MLA said beef exports to China rose by 3pc YoY to 19,991 tonnes, exports to South Korea eased by 6pc to 17,304 tonnes, and exports to Japan eased by 23pc YoY to 14,435 tonnes. Current frozen stock levels in those countries are reportedly very high, so it is likely that some of the ‘backlog’ stock will need to clear before the true demand picture becomes evident, MLA said.


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