Strong demand for lamb meets tightening supply
25 September 2018
Key points:
- Sheep slaughter forecasts revised up on the back of ongoing dry conditions
- Lamb prices reach record highs as strong demand meets tightening supply
- Australian sheepmeat export values hit new heights
- National flock estimated to decrease 5.5% to around 68 million head
Intensifying poor conditions across many of Australia’s key sheep production areas have seen a significant upward revision of sheep slaughter forecasts for 2018 in Meat & Livestock Australia’s (MLA) Sheep Industry Projections September update.
Annual lamb slaughter is now projected to be 22.9 million head for 2018, up 2% on 2017, while sheep slaughter is forecast to reach 9.3 million head, up 23% on 2017 levels.
MLA’s Market Intelligence Manager, Scott Tolmie, said it has been a year of extremes so far for the Australian lamb market, with prices soaring into uncharted territory as strong demand meets tightening supply.
“Australian lamb prices have been rising strongly since April, breaking records as they smashed through the 700c and 800c/kg carcase weight marks for the first time,” Mr Tolmie said.
“Poor seasonal conditions and high feed costs have led to a waning supply of finished lambs as the year has progressed. This, combined with strong international demand, has resulted in fierce competition for a diminishing supply and driven up prices across the board.
“The dry conditions drove increased lamb slaughter for the first half of the year, spiking in the second quarter of 2018 as conditions worsened and producers looked to destock. This peaked in June with the highest month of lamb slaughter on record.
“Lamb slaughter has fallen in recent months due to the delay in new season lambs entering the market.
“With no indication of improved seasonal conditions in the short-term, reports suggest there will be greater numbers of light weight, unfinished new season lambs coming onto the market this year, as many producers in drought-stricken NSW and northern Victoria face challenging feed conditions.
“The timing and quality of the new season lamb crop will have a large impact on prices for the rest of 2018.”
Mr Tolmie said while strong lamb and mutton prices have been a motivating factor to maintain or build flock numbers, the lack of rain across much of Australia has put a lot of pressure on producers to de-stock or supplementary feed.
Mr Tolmie said the ongoing dry conditions had also placed downward pressure on carcase weights, with the national average lamb carcase weight for 2018 forecast to be 2% lower than 2017 and the average sheep carcase weight down 8%, at 23kg.
“In terms of lamb production, lighter carcase weights are expected to offset the year-on-year rise in slaughter in 2018. Total lamb production forecast for the year is 511,000 tonnes carcase weight (cwt), which is very similar to year-ago levels,” Mr Tolmie said.
“Higher sheep slaughter, only partly offset by lighter carcases, has lifted forecast mutton production to 213,000 tonnes cwt for 2018 – an increase of 13% from 2017.”
Looking at the export market, Mr Tolmie said strong global demand for Australian sheepmeat, combined with the softer Australian dollar and constrained domestic supplies out of New Zealand, have supported record export volumes and values.
“Lamb exports between January and August increased 12%, to a record 183,000 tonnes shipped weight (swt), while mutton shipments surged 25%, to 105,000 tonnes swt,” Mr Tolmie said.
“Furthermore, the unit value of Australian lamb exports for the year-to-July reached new record highs, at A$8/kg, and was mirrored in mutton, which climbed to A$5.88/kg for the same period.
“These factors saw the value of Australian sheepmeat exports last financial year hit new heights, at A$3.29 billion, up 24% year-on-year. Nonetheless the domestic market remains the single most valuable for the industry with Australians the world's largest consumers of lamb on a per capita basis.
Read the September update of MLA’s 2018 Sheep Industry Projections.
MLA provides a range of market information services including daily red meat market news updates, regional saleyard reports, live export information and price indicators.
