MUTTON prices crashed in Australian saleyards this week amid reports of a pullback in demand by major market China and processors with ample pre-Christmas supplies ceasing buying in anticipation of a price correction and import order renegotiations.

Meat & Livestock Australia’s Eastern States Daily Mutton Indicator fell 9 cents on Monday and then crashed another 18 cents yesterday, as sheep sold for up to $30 below recent rates.

After yesterday’s saleyard sales, the Eastern States Daily Mutton Indicator was 18 cents lower on 540c/kg, 41 cents lower than a week ago, 49 cents lower month-on-month, yet still 131 cents above rates a year ago. The indicator fell another 17 cents today.

Trade and export lamb prices also fell in eastern states markets yesterday as warmer weather gave buyers more selection and more drier lambs were offered. The trade lamb indicator dropped eight cents to 702c/kg and the heavy indicator lost 10 cents to close on 710c/kg. The indicators are still 3-4c/kg above last week’s rates, though lower than a month ago.

Some processors have directed buyers to cease buying sheep as the market adjusts, while agents have reported that many works have enough sheep around them for current orders as Christmas/New Year holiday period approaches.

Other trade sources said factors in the mutton price drop included China importing too much pork recently and the need for Chinese businesses to balance their books at the end of the year was also a factor in some companies honouring shipment payments. Sources indicate six-way mutton was the most affected, rather than value-added cuts, although beef import prices had been impacted more.

“There has been a huge influx from all sorts of countries up to Chinese New Year,” one source said.

“It’s not just one issue.”

However, the expectation was that the Australian mutton exporters licenced to ship into China and other shipping elsewhere would adjust to place product in other markets or put it into cold storage for the short-term.

At the Forbes saleyards yesterday the National Livestock Reporting Service reported medium and heavy ewe prices falling sharply, generally $10-$25, with Merino ewes selling from $105-$170. Crossbred ewes sold from $90-$178, Dorper ewes from $75-$156. Merino wethers made to $173. Agents yarded 8700 lambs, 1000 fewer than last week, and 6600 sheep, 5150 less.

Processors are surrounded by sheep

Forbes agent Kevin Miller from Miller Whitty Lennon and Co said no one knew exactly while sheep prices had dropped, “but all the abattoirs are clogged up.”

“And they tell me China is playing up a little bit – if China sneezes we’ll get a cold,” he said.

“China has been very good with that mutton job and we are all hoping and praying that it will last, but they can pull the plug at any time, as they have done on the skin job.”

Mr Miller said the processors did not want to feed livestock over the Christmas-New Year break at current hay and grain costs, and risk weight losses in sheep and cattle through the current heatwave.

Mr Miller said good shorn lambs sold very well, top heavy lambs were $5-$7 dearer and woolly lambs were fully firm.

The NLRS said light lambs to restockers held firm at $80-$150. Trade weight new season lambs were back $4 to $135-$178. Old trade weight lambs held mostly steady at $148-$177. The heavy and extra heavy weight lambs were also firm, with heavy lambs to 26kg making $175-$202. Extra heavy weights sold from $207-$234. Carcase prices ranged from 732-772c/kg cwt.

At the Ballarat saleyards, yesterday agents yarded 11,435 sheep, 10,284 fewer, but the NLRS said not all the usual mutton buyers attended or operated fully as processers have filled orders before the Christmas break.

Sheep prices fell $10-$30, with light weight 1 and 2 score sheep making $45-$112 to average 500c/kg. Medium weight sheep made $89-$140, or 424-609c/kg cwt. Merino mutton averaged around 540c/kg. Heavy Merino ewes sold from $126-$156 and heavy crossbred ewes made $112-$165. Heavy Merino wethers sold from $124-$148 and medium weights made $89-$130 to average around 520c/kg. Rams sold from $15-$75.

The NLRS said all the usual Ballarat lamb buyers attended, but not all operated fully in the easier market. Prices were $5-$10 back on last week, with most lambs showing dryness in the skins. Heavy lambs sold to $241 and 22-30kg-plus shorn lambs made $160-$233.

Elders livestock manager at Ballarat Graeme Nicholson attributed the mutton price drop to the time of the year.

“This is always a bad week to be selling mutton.

“I think it is more that they’ve got heaps around them and they’ve got to paddock everything they buy,” he said.

“I think it is probably a mini-correction that probably will perhaps right itself in the New Year.”

Mr Nicholson said lamb prices held for the right quality and most new season lambs now needed shearing.

“If you didn’t have the quality right, you got smashed.”

Price correction might be short-lived

Major heavy sheep buyer Fletcher International Exports principal Roger Fletcher said the mutton price adjustment was not a problem for his company, although he said “the best cure for high prices is high prices.”

“We’re not a trader in a (sheep meat) commodity.”

“It will sort itself out, don’t panic,” he said.

“We’re low in stock numbers now, we’ve got a variety of markets around the world and it is up to us to sensibly manage it.

“No one animal has made as more money than where mutton has come from and it’s had no promotion at all.”

He said most works will slow down over Christmas, but Chinese New Year on January 26 was a period when a lot of meat is eaten.

“But if it is too dear, people don’t buy as much.”

Red meat trade and analyst Simon Quilty said with the dramatic fall in grinding beef prices, with 90CL trading at 295c/kg 2-4 weeks ago and at 235c/kg today. He said Australian and New Zealand beef processors had told him there had been some cancellations of orders and renegotiation of pricing.

“If it has happened on beef, there is a good chance it has happened on mutton.

“My feeling is with this new pricing and business being renegotiated right, the correction is about 10 percent and I feel that we’ve got another two weeks left of this sluggish market and then hopefully demand will pick up, even though that is before Chinese New Year on January 26,” he said.

“There are a lot of interested parties buying at these levels and one customers has told me he has sold to Singapore and Korea nine loads, so suddenly the rest of the world can afford it at these numbers.

“There just needed to be a price correction,” he said.

Mr Quilty said the price correction is also seasonal.

“I think a lot of people got kind of carried away with the rush and then come December, the way things are structured in China, it is the end of their financial year.

“So a lot of people were off-loading stock and you had a huge amount of imports and we had frozen pork that they had killed earlier in the year, suddenly coming back onto the market, for the reason that the government desperately wants to lower prices.”

China-US trade deal unlikely to our sheep meat trade

An MLA spokesman said the US-China trade deal is not affected to affect the Australian sheep meat sector.

“It’s unlikely any type of deal with the US will affect the lamb or mutton trade.

“The US exports very little sheep meat – just under 4000 tonnes over the 12 months to October, well below the 462,000 tonnes Australia shipped over the 12 month to November,” he said.

“New Zealand will remain the only real competitor on the imported sheep meat market in China for the foreseeable future.

“However, high prices are expected to encourage domestic Chinese sheep meat production growth, which is very cyclical and marred by a boom and bust business model,” he said.

“Domestic supplies in China have potential to have a far greater impact than any US product entering the market.

“Regardless, we still believe the sheep meat outlook for China is still largely positive.”