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Sheep projections

The national flock continued to contract last year as conditions deteriorated in many key sheep production regions. On the back of the warmest and driest year on record, water and feed availability created heightened pressures for producers, particularly in NSW and northern Victoria, with many forced to offload core breeding stock. At 63.7 million head, the national flock is now estimated to be at its lowest level in more than a century.

The impact and severity of consecutive drought years will be felt across both sheep and lamb supply in 2020 and for a number of years to come. The strong prices being achieved across lamb and mutton are expected to provide plenty of incentive for producers to rebuild their flocks and, under the assumption of a return to average seasonal conditions, this will likely be achieved by retaining their core breeding stock and ewe lambs. Consequently, sheep slaughter is forecast to decline 22% to 7.2 million head in 2020 and lamb slaughter is anticipated to decline to 21 million head (8% below the pre-drought peak in 2016). This reflects the impact of the diminished breeding flock, generally lower marking rates and the expectation of greater retention of ewe lambs on-farm.

Lamb carcase weights are forecast to increase in 2020 due to the growing prevalence of supplementary feeding or lot feeding lambs, improved pasture availability and strong price incentives to finish lambs to heavier weights. As a result, lamb production is forecast to remain stable at 500,000 tonnes carcase weight (cwt), despite a decline in slaughter. The impact of the decrease in sheep slaughter will not be offset by the expected increase in sheep carcase weights, with mutton production forecast to fall 21% to 178,000 tonnes cwt.

Broadly, global demand for quality sheepmeat has outstripped supply in recent years, pushing prices in many markets to new highs. Australian lamb exports are forecast to break records again next year on the back of this robust international demand combined with a soft Australian dollar. There was a significant shift in the global meat trade dynamics last year, with the impact of African Swine Fever (ASF) causing a sizeable protein deficit in the China market, which drove up their already growing demand for imported lamb and mutton. The expectation is for many of these same dynamics to be at play again in 2020, with markets such as the Middle East and other Asian countries having to compete more fiercely with China for product. However the outbreak of the coronavirus at the start of 2020 has added a layer of uncertainty and caused disruption to the China and global market.

In the last two years, supply constraints during the winter have seen prices surge to new records. With the aforementioned demand unlikely to waiver and the expectation for fewer lambs available for slaughter, in particular out of NSW, lamb prices are expected to remain at historically high levels in 2020. Similarly, mutton prices, on the back of strong demand, limited international competition and an expected drop in supply next year, should see continued price support at or above recent levels.