Australia’s sheep flock is getting smaller and wool is losing market share to synthetic fibre clothing, according to the latest forecasts from the Australian Bureau of Agricultural and Resource Economics and Sciences.
But the value and tonnage of lamb and live sheep exports is expected to continue to rise and mutton shipments will fall but also increase in value, ABARES analyst Robert Leith said in the Agricultural Commodities December quarter report out today.
Mr Leith said the Australian sheep flock is forecast to end the 2014-15 year at 69.8 million head, a fall of four percent on the previous estimate as total sheep turn-off remains at historically high levels.
Annual turn-off (slaughter and live export) is forecast to remain at 34 million head, well above the average of 28.5 million head during the flock rebuilding period of 2009–10 to 2012–13.
The shift in primary output from wool to lamb had caused the substantial shift in flock demographics and size, and the relative profitability of producing meat and wool will continue to influence the composition of the flock, Mr Leith said.
Lamb slaughter to increase
Mr Leith said with below-average rainfall forecast for eastern Australia from December this year to February 2015, slaughter is expected to remain at relatively high levels in the December and March quarters.
Lamb slaughter increased by around 6pc year-on-year in the September quarter, with a 4pc lift in the average lamb carcase weight to 22kg.
“Following a 4pc increase in 2013–14, lamb slaughter is expected to increase by 2pc in 2014–15 as a whole to 22.3 million head.
“Reflecting this, and an increase in average carcass weight to 21.9 kilograms, lamb production is forecast to increase by 3pc to 489,000 tonnes in 2014–15.”
Mutton production to fall
Mr Leith said mutton production is forecast to fall by 3pc in 2014–15 to 221,000 tonnes, reflecting a 9pc fall in the supply of older sheep for slaughter and a 7pc increase in slaughter weight.
“Sheep slaughter rose by 58pc in 2012–13 and by 23pc in 2013–14, as ongoing hot and dry conditions in parts of the country reduced the stocking capacity of producers.
“The supply of sheep for slaughter is expected to remain relatively high in 2014–15 as a whole because below average rainfall is forecast in the next few months.”
Lamb exports and value to rise
The value of Australian lamb exports is forecast to lift 12pc to $1.6 billion as tonnages increase by 6pc to 240,000 tonnes, reflecting strong demand from the United States and the Middle East, which led to higher lamb exports in the first five months of 2014–15, he said.
Lamb exports to China fell by 5pc, but in the five months to November 2014, total Australian exports increased by 11pc year-on-year to 103,000 tonnes. Exports exceeded 24,000 tonnes in October — the highest monthly volume on record. Mr Leith said the average export unit value of lamb increased by 9pc year-on-year in the September quarter, ABARE analyst Robert Leith said.
Mutton export value to lift to $700m
ABARES predicted mutton exports to fall by 5pc in 2014–15 to 172 000 tonnes, but lift in value by 7pc to $700m.
“This mainly reflects higher export prices.
“China and the Middle East are the two largest export destinations for Australian mutton,” he said.
“In the five months to November 2014, mutton exports to the Middle East increased by 61pc year-on-year and exports to China fell by 29pc.”
Live sheep exports to increase
Mr Leith said Australian exports of live sheep increased by 36pc year-on-year in the September quarter 2014, driven largely by the resumption of trade with Bahrain and Egypt. Exports to the United Arab Emirates increased by 70pc to 96,000 head, while exports to Qatar remained largely unchanged at 100,000 head. Exports to Kuwait fell by 5pc to 164,000 head.
Mr Leith said Australia exported 105 000 head of sheep to Bahrain in the September quarter, a market where trade was suspended during the same period in the previous year. Since reopening in April 2014, Bahrain has been the third-largest market for Australian sheep behind Kuwait and Qatar.
Australian sheep exports to Egypt recommenced during the September quarter 2014. Exports to Egypt totalled 31,000 head during the quarter, he said.
“Following an increase of 1pc in 2013–14, live sheep exports are forecast to increase by 19pc in 2014–15 to 2.4 million head.
“The value of sheep exports is forecast to rise by 62pc to $300 million, driven by growth in both volume and export prices.”
Wool exports fall with demand
Mr Leith said wool exports to China, Australia’s largest export market for wool, fell by 2pc in the September quarter to 68,000 tonnes, with a decline of 9pc in export prices.
“Weaker demand for Chinese wool apparel, in both the domestic retail market and major export markets, has resulted in lower demand for Australian raw wool.
“The United States is China’s largest export market for apparel. US imports of Chinese wool apparel in the September quarter fell by 1pc year-on-year, and were 31pc below their peak in 2010,” he said.
“This decline in wool imports is in contrast to continued growth in demand for apparel made from synthetic fibres.
“US imports of Chinese synthetic fibre apparel increased by 12pc year-on-year in the September quarter 2014 and were around 77pc higher than in the September quarter 2008,” Mr Leith said.
Wool exports expected to decline
Reflecting weaker demand, Australian wool exports are forecast to decline by 4pc in 2014–15 to 410,000 tonnes (greasy equivalent), he said.
“The value of exports is forecast to fall by 6 per cent to $2.7 billion, with expected lower export prices.”
Australian wool exports in the September quarter 2014 fell by 1pc year-on-year to 93,400 tonnes, while the export unit value fell by 7pc. Exports to the European Union increased by 8pc year-on-year to 8900 tonnes, while exports to India remained largely unchanged at 6000 tonnes.
Shorn wool production to fall
Australian shorn wool production is forecast to fall by 4pc in 2014–15 to around 336,000 tonnes, Mr Leith said.
“With the sheep flock expected to decline, the number of sheep shorn is forecast to fall to 76 million head.
“Partially offsetting this fall, wool cut per head is forecast to increase slightly,” he said.
“Although below-average rainfall has occurred in many areas, pasture conditions have improved in some areas compared with 2013–14 and this has led to higher wool yields.”