Sheep and lamb markets set to be strongest on record

Key points:

• Extremely strong producer intent to maintain breeding ewes, strong wool prices and low grain prices major influences on Australian sheep industry in 2017
• 2.7 million fewer sheep and lambs to be processed in 2017 compared to last year
• 2017 lamb slaughter forecasts revised down by 500,000 head to 21.5 million head
• Mutton slaughter set to be second lowest on record – a 1.2 million head (17%) year-on-year drop to 5.8 million
• Sheep and lamb prices set to average alongside, or even exceed, previous records on the back of tighter than usual supply

Australia’s sheep and lamb markets are predicted to strengthen further with near record prices, as production and slaughter forecasts are revised lower for 2017 according to Meat & Livestock Australia’s (MLA) quarterly update of its 2017 Australian Sheep Industry Projections.

MLA’s Manager of Market Information Services, Ben Thomas, said the market was being influenced by a combination of factors, including extremely strong producer intent to retain ewes for flock rebuilding, the current strength of the wool market and low grain prices.

“Lamb slaughter is expected to contract further this year, revised down a further 500,000 head from original predictions to 21.5 million head for 2017 and down 1.5 million head, or 7%, on the 2016 record,” Mr Thomas said.

“In terms of availability throughout the year, on the ground reports suggest a reasonably strong supply through to the end of April, before numbers will become tight until the new spring flush.

“Lamb production is expected to fall 6% year-on-year in 2017 to 481,600 tonnes carcase weight (cwt), before rebounding back above the 500,000 tonnes mark in 2019.

“Similar to lamb slaughter, mutton processing is also expected to contract further year-on-year, with a 1.2 million head, or 17%, year-on-year drop to 5.8 million head for 2017.

“The reduced slaughter numbers has led to a downward revision of export forecasts, with an expected 7% drop in lamb shipments for 2017, to 225,000 tonnes shipped weight (swt) – 5,000 tonnes swt lower than forecast.

“The US, China and the Middle East are expected to remain the major export markets.

“Mutton exports have also been revised, with 102,000 tonnes swt expected to leave Australia, down 18% on last year.”

Mr Thomas said with 2.7 million less sheep and lambs set to be processed year-on year, the short supply will keep prices buoyant for the remainder of 2017.

“The current combination of factors in the market will lead prices to average alongside, or even exceed, the previous records,” Mr Thomas said.
 
“Despite the buoyant market, there is a concern around the sustainability of the current price levels further up the supply chain, with some recent temporary closures of processing facilities.

“The risk for producers is once the number of sheep and lambs available for processing do recover, and if processing capacity remains reduced, there is the potential for a greater correction in prices than otherwise would have been the case.

“However, producers can be cautiously optimistic about prices beyond 2017, which will largely be determined by the rate of flock recovery and the extent to which processing capacity reduces.”

Click here to read the April quarterly update of MLA’s 2017 Sheep Industry Projections.

MLA provides a range of market information services including daily red meat market news updates, detailed market analysis, regional saleyard reports, live export information and price indicators.

To read more or to subscribe to regular market information, visit the Prices & Markets section of MLA’s website.