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MLA predicts a positive outlook for Australia’s lamb industry.
Australian sheep farmers are banking on strong prices lamb in the coming years, but are warning of headwinds.
Tighter New Zealand production, continued global demand and a lower Australian dollar will continue to boost earnings, according to Meat and Livestock Australia.
MLA’s sheep industry projections for April indicate that strong market fundamentals for sheep and lamb prices should remain in place over the coming years.
However, MLA manager of market information Ben Thomas says the price potential for Australian sheep and lambs could be capped this year, due to unrelenting slaughter and higher, but slow-moving supplies in Australia’s largest three markets – China, the US and domestically.
“Offsetting the potential downward pressure on prices will be a slowdown in slaughter, which will happen if the three month rainfall outlook comes to fruition,” he says.
While lamb slaughter for the first quarter has remained steady on last year, the final slaughter figure is predicted to be 850,000 lower, at 21.4 million, and supplies tighter as the year progresses.
On the other hand, mutton supplies are already tightening, following two very high slaughter years; mutton slaughter for the first quarter of this year is already back 20% year-on-year, despite the dry conditions.
The Australian sheep flock has been revised down to just below 70 million head, as a result of prolonged mutton slaughter.
Thomas says nevertheless Australian exports for the first quarter were up 6% year-on-year, with the US (12,302 tonnes swt), China (8714 tonnes swt) and the Middle East (16,037 tonnes swt) the largest markets, making up 63% of exports while shipments to the EU were down 14% (3031 tonnes swt).
“While some indications in our largest markets suggest prices could come under pressure in the coming months – from higher global stocks and high domestic slaughter – the long term prospects for the sheep and lamb industry remain positive.”
After a strong start to the year, slow moving product in Australia, the US and China, Australia’s three largest sheepmeat markets, may cap Australian sheep and lamb price potential for the remainder of the year.
Offsetting this downward pressure will be a reduction in lamb slaughter, which will occur when seasonal conditions improve in southern Australia. For mutton, while slaughter and throughput has already slowed, any sustained support for prices will depend on when restocking interest is ignited.
Fortunately, after a dry February and March, the Bureau of Meteorology three month rainfall outlook points to ‘above average’ rainfall for most of southern Australia, which, if it eventuates, will go a long way to relieving the lamb supply pressure.
MLA sheepmeat survey results suggest that, as at February 28 February, the Australian breeding ewe flock had remained relatively unchanged year-on-year, at 41 million head.
Lamb kill revised
After a drier than expected first quarter, Australian lamb slaughter for 2015 has been revised higher, to 21.4 million head – which is still 850,000 head lower than the 2014 total.
Tighter supplies are likely once seasonal conditions improve.
The 2015 sheep slaughter forecast (7.5 million head) remains in line with the initial prediction, at 26% lower than 2014, with signs of shortening supplies already evident.
Importantly, with a pronounced slowdown in sheep slaughter, and continued high lamb slaughter, the national flock forecast for June 30, 2015 has been revised to 69.8 million head (down 1.8 million head, or 3%, on 2014) – falling below the 70 million mark for only the second time in a century.
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