Dry conditions drive up sheepmeat slaughter forecasts

30 May 2018

A dry summer and the absence of an autumn break across many key supply regions has seen national lamb and sheep slaughter forecasts revised upwards in the May update of MLA’s Sheep Industry Projections.

The dry continues

National lamb slaughter for the year is now forecast to reach 22.85 million head, up 2% year-on-year, while sheep slaughter is expected to reach 7.8 million head, up 4% from 2017 levels.

MLA’s Market Intelligence Manager, Scott Tolmie, said ongoing dry conditions have limited the ability of many producers to expand flocks despite both sheepmeat and wool prices remaining near historical highs.

“For the first quarter of 2018, national lamb slaughter tracked 4% higher than the same period last year, at 5.8 million head,” Mr Tolmie said.

The rise was driven by greater numbers processed in NSW (up 9%) and Victoria (up 14%) – partly the result of absorbing some of the lost capacity from a major plant closure in South Australia, but largely due to the tough growing conditions.

Sheep slaughter for the January to March period was up 9% from year-ago levels, to 2.1 million head.

Expansion of national flock to stabilise

With the upwards revision to slaughter, production volume forecasts for 2018 have been adjusted higher. Lamb production for 2018 is forecast to reach 524,000 tonnes carcase weight (cwt), up 3% year-on-year, while mutton production is expected to lift 2%, to 192,000 tonnes cwt.

“A tough summer and the absence of an autumn break, particularly across most of NSW, has challenged producer intentions to maintain or expand the size of ewe flocks. NSW sheep slaughter for the first quarter was the highest it’s been since 2009,” Mr Tolmie said.

“The projected flow-on effect is a delay in the expansion of the national flock, with numbers now expected to remain stable at around 72 million in June 2018.”

Strong international demand supports prices

Mr Tolmie said despite increased slaughter, the Eastern States Trade Lamb Indicator (ESTLI) remains above the five-year average, albeit below the levels seen at the beginning of the year.

The ESTLI averaged 613c/kg cwt for the year-to-April, back 4% on year-ago levels. However, at these levels, the Indicator remains historically high, up 17% on the five-year average for the period.

Lamb prices in the west have outperformed the eastern states so far in 2018, with the WA trade lamb average price for the year-to-April up 6% or over 30c/kg on year-ago levels. In fact, trade lambs in WA have traded at a premium to those in the east for only the second time since 2015.

“Strong international demand is helping to support prices, with sheepmeat export growth being driven by Asia, particularly China, combined with subdued competition from New Zealand,” Mr Tolmie said.

Sheepmeat exports continue to grow

The upward revision of the annual lamb and sheep slaughter outlook has seen full year export forecasts increase. Lamb shipments are likely to surpass 2017’s record-breaking year and mutton exports reach a three-year high.

For the first four months of 2018, Australian sheepmeat exports grew 11% year-on-year on the back of the higher lamb and mutton production.

Carcase weights hold steady

Mr Tolmie said with many producers relying heavily on supplementary feeding, carcase weights for the first three months of the year have held up well, remaining firm on year-ago levels at 23.1kg nationally.

“Lamb carcases in NSW recorded a 5% increase year-on-year, offsetting declines in other states, averaging over 25kg in the first quarter of 2018,” Mr Tolmie said.

“However, sheep carcase weights tracked below 2017 levels across all states for the March quarter. The national average was 2% lower than last year, at 23.6kg.”

Read the full May update here

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