Strong North American lamb demand to continue – Quilty

Terry Sim, October 13, 2021

Global AgriTrends analyst Simon Quilty: Australian exporters should be congratulated on their success in the North American market.

LAMB producers have been urged not to panic about the mooted capacity impacts of COVID-19 workforce restrictions on metropolitan processors.

Global AgriTrends analyst Simon Quilty said leaving COVID-19 outbreaks in regional towns as a separate issue, the net effect on the state’s sheep/lamb processing capacity would be about 8 percent.

This is based on the historical processing of 60pc of lambs in regional plants and about 40pc in metropolitan facilities. So the State Government’s 20pc workforce restrictions on metropolitan plants equates to an overall 8pc statewide reduction in capacity, he suggested.

“So when you then look at capacity over the last 3-4 years, back to the end of 2018-19, and compare this to the forecast for this coming season by Meat & Livestock Australia, combining smallstock (mutton and lamb) sharing the same chain, the combined impact is an 18pc fall for this year.”

Mr Quilty said the lamb/sheep turn-off is coming off a much lower base.

“And when you take in both mutton and lamb turn-off and the reduced slaughtering that’s expected, and so far lamb prices have gone up, not fallen, where’s the logic?”

Mr Quilty said MLA figures indicated lamb slaughtering nationally will be 11pc lower this year and the mutton kill will be 36pc down.

“So it just strikes me, that if you first look at the capacity of only 2.5 years ago plus if you look at the current pricing of mutton and lamb, so far since these restrictions have been introduced in early September, there has been no impact whatsoever on pricing.

“In fact, these seasonal prices are much higher in the last three years than we’ve ever seen before,”

“There is adequate capacity,” Mr Quilty said.

Despite COVID-19 issues at some plants and at the Australian Lamb Company’s Colac operation which shut recently because of community infection of some staff, Mr Quilty is confident the sector had the ability to management the impact of any outbreaks.

“You’ve also got an operator like JBS with capacity at both Bordertown and Brooklyn; they’re smart operators and can work the capacity between both facilities very well.

“I think overall what we don’t want is lamb producers to start panicking that there is not enough capacity.

“The reality as indicated by the pricing and the numbers tells us that there is.”

Where are heavy lamb prices going?

Mr Quilty said there has been extraordinary growth in lamb demand in North America, and as a high-end product of the market.

“You can see that in the pricing that goes on in that market.”
“Demand is exceptional for high products, suiting lambs in North America and my forecast is that we will continue to see strong demand in lamb well into next year and likely into the year after,” he said.

Mr Quilty said the United States Department of Agriculture has North American lamb production dropping 3.1pc next year.

“So when you look at both the tightening of supply and the growth in popularity and demand of lamb the net effect is that I expect lamb prices next year to be strong.

“I’ve got it peaking in July next year nationally at about 1025c/kg (MLA National Heavy Lamb Indicator) carcase weight, that’s on the back of the September average this year of 960c/kg, so it’s a healthy outlook,” he said.

“And for mutton equally, I think we are going to have strong global demand for that end of the market as well, part driven by the lack of lean meat, that will be in short supply next year.

“I’ve got a peak in June next year at 840c/kg.”

Heavy export lamb pricing is linked to high-end beef value

Mr Quilty said comparing high-end beef pricing versus export lamb values, there has been a strong correlation of 86pc since mid-2019. Both Australia and the US are producers of high-end grain-fed beef and lamb.

“So here are we are 27 months later and there is a very strong correlation between the value of high-end beef and the export value of lamb.”

Mr Quilty said there has been a proliferation of lamb grain-feeding operations and on-farm feedlots, part driven by efforts to improve eating quality, but also to enable the marketing of lambs outside the usual Spring-Summer period when availability is tighter.

“And you are going to end up with a heavier lambs for that US market that is in high demand.

“We are seeing production systems change by putting animals on feed which is effectively trying to take advantage of those higher prices when supply is out of season,” he said.

“I’m very optimistic about not just next year, but also the following year, right on the back of the tight supply of North American meat.”

Have Australian exporters made lamb the new Wagyu?

Mr Quilty said 80pc of global lamb exports come from Australia and New Zealand, and he did not see the likelihood of Irish lamb imports into China as a threat. Australian exporters dominate the North American market, sending almost 70pc of about 60,000 tonnes sent to the US in the first seven months this year.

“Our role has grown in North America supplying lamb, but equally, if you look at the role of New Zealand in china, it’s the reverse.

“New Zealand is the dominant player in China and in the first seven months of this year, they supplied 74pc of that market’s needs in lamb,” he said.

“So effectively, we’ve taken up the mantle of supplying heavy lambs in the US and it’s the complete reverse into China, where New Zealand’s smaller lamb dominated that market.”

Mr Quilty said there has been Australian licences for lamb into China that have not been renewed since the COVID-19 pandemic started and China’s political relationship with New Zealand is better and the NZ Free Trade Agreement is “fully intact.”

“Thirdly, China’s desire for the smaller lamb and New Zealand’s ability to supply it is strong.”

Mr Quilty said retail sales of lamb in North America this year have been 34pc above 2019 levels and 6pc up on volumes of an exceptional 2020, despite the COVID-19 pandemic.

“Whether it is imported or domestic, the clear message is that North America has fallen in love with lamb and dare I say: Is lamb the new Wagyu?

It is now, I think, a high-end product in North America and a lot of exporters and processors out of Australia have to be congratulated the way they have positioned lamb in the Northern American market, they’ve done a great job,” he said.

“It truly is a success story.”

Mr Quilty said wider uptake of processor assessment of eating quality traits, such as the intramuscular lamb grid at Gundagai Meat Processors, and the advent of under the Meat Standards Australia lamb model, would help Australia maintain and grow market share in North America.

“I think already that momentum has started.”


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  1. Dwain Duxson, October 14, 2021

    Another Australian ag success story…

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