Despite being plagued by drought throughout most of 2007, the Australian lamb industry showed remarkable resilience last year and should be rewarded with a much brighter 2008.
The prospect for good seasonal conditions in 2008, combined with tighter lamb supplies and strong demand, signals the possibility of higher prices and incomes to lamb producers in the year ahead, according to Meat & Livestock Australia’s 2008 Cattle and Sheep Industry Projections, released today.
In releasing the report, Meat & Livestock Australia’s chief market analyst Peter Weeks said a significant seasonal turnaround through late spring and summer, with widespread rain across the eastern states, has provided lamb producers with reason for optimism heading into 2008.
“2008 is certainly looking like a better year for lamb producers, with a continuation of the better season likely to see flock rebuilding, increased feed availability, lower costs and more lambs sold in top condition,” Mr Weeks said.
“However, the improvement in the season will not be reflected in Australian lamb supplies until at least spring, with turnoff forecast to tighten significantly throughout autumn and winter.
“With the tighter supplies forecast, lamb prices are expected to be higher throughout 2008, particularly for the lighter grades.”
Lamb slaughter for 2008 is forecast to fall 8 percent, to 19 million head; a legacy of the poor breeding season in 2006-07 and high lamb kills in late 2007. However, a 2 percent increase in average carcase weights is expected to keep the fall in lamb production for the year to 6 percent, to 400,000 tonnes (cwt) – still the second highest annual total on record.
Assuming there is a significant improvement in seasonal conditions from autumn 2008, including an above average 2008-09 winter grain harvest, lamb production is forecast to rebound in 2009 and continue growing through to 2012.
Mr Weeks said overseas consumers continue to look primarily to Australia to supply their growing demand for lamb.
“However, tighter lamb production in 2008 is likely to see Australian lamb exports fall 12 percent in 2008, down from the record 161,000 tonnes (swt) shipped during 2007. Less lamb will also be available for the domestic market,” Mr Weeks said.
Despite the restricted supplies, overseas demand for Australian lamb is expected to remain strong in 2008. Lamb exports are forecast to decline to almost all major markets, with North America and the European Union least affected. North America and Asia remain Australia’s main overseas markets for lamb.
Over the medium term, the underlying strong demand for lamb, and consequential production growth, should see local consumption and exports increase.
The Australian love affair with lamb continues, with estimated domestic expenditure on lamb up around 5 percent in 2007, to almost $2 billion – double the value 10 years ago. While lower supplies are expected to raise retail prices and drop consumption slightly in 2008, rising supplies, a solid economy and improved product quality and marketing are projected to lead to an 8 percent expansion in Australian lamb consumption over the coming five years.
“The sheep industry appears set to enter a period of rebuilding, characterized by sustained low sheep turnoff and mutton supplies, and historically high prices,” Mr Weeks said.
“Seven consecutive years of drought, including two of the worst ever in 2002-03 and 2006-07, has seen the Australian sheep flock plummet to 86.3 million head, its lowest level since 1924.
“With high lamb prices, the recent impressive recovery in wool returns and many southern farms under-stocked, the stage is set for a period of steady flock rebuilding, providing seasons improve.”
As a result, a sharp fall is expected in sheep (as opposed to lamb) turnoff and mutton production and exports in 2008. Sheep slaughter is forecast to fall 33 percent in 2008, to 7.8 million head.
Mutton exports for 2008 are forecast to decline 38 percent on 2007, to 93,000 tonnes (swt), while live sheep volumes are forecast to only decline 5 percent, to 3.6 million head.
These declines are only supply-driven, as global demand for sheepmeat, and Middle East demand for sheepmeat and live sheep in particular, continues to grow.
Mr Weeks characterised the lamb and sheepmeat industry as being in the envious position of having a devoted, secure, diverse and growing customer base, but struggling to expand fast enough to satisfy this demand.
Ends
Released by: Damon Whittock, MLA Media Affairs Manager – ph. 02 9463 9368.
Media contact: Peter Weeks – ph. 02 9463 9167.