Sheep prices buoyed as flock shrinks
An expected winter supply contraction will underpin strong sheep and lamb prices in the coming months as the national flock starts to recover.
Meat and Livestock Australia’s latest sheep industry projections, released on Tuesday, forecast the country's lamb slaughter to fall about 5 per cent to 20.6 million this year.
It comes on the back of sheep producers, particularly in New South Wales, wanting to rebuild their flocks after strong rains put an end to the east coast’s two-year drought.
Although rain had wet drought-ravaged areas, MLA senior market analyst Adam Cheetham said impacts from the consecutive years’ parched conditions were ongoing.
He said it had reduced this year’s overall sheep and lamb supply.
“Similar to 2018 and 2019, supply is expected to be particularly tight during the winter months, given the depleted breeding ewe flock and fewer lambs on the ground,” he said.
“Lamb carcase weights are forecast to increase 0.6kg/head on 2019 levels to 23.9kg/head, assisted by improved feed availability, a greater number of lambs in lot feeding programs and strong price incentives to finish lambs to heavier weights.
“However, increasing weights will not be sufficient to offset the fall in slaughter.
“As a result, lamb production in 2020 is forecast to decline 2 per cent year-on-year, to 492,000 tonnes carcase weight.”
Mr Cheetham noted a global recession was approaching in the wake of the coronavirus crisis.
With more than two thirds of Australian exports destined for heavily impacted food service channels, he said market recovery was critical for Australian sheepmeat demand.
However, Mr Cheetham said sheepmeat remained a “niche, premium component of many diets” globally.
“The impact of COVID-19 on Australian sheepmeat demand may be more sheltered than many sectors, given that lamb and mutton play a central role in a broad mix of cultures and cuisines,” he said.
“Encouragingly, growing retail demand, a soft Australian dollar and the African swine fever-induced protein deficit continue to drive export prices for sheepmeat, particularly as key markets such as China and the United States compete for shorter supplies.”
Given Australia’s lack of sheep supply and an international want for sheepmeat, Mr Cheetham tipped prices to remain at historically high levels for the rest of the year.
“The expectation for fewer lambs available for slaughter, strong re-stocker demand for ewe lambs, limited competition from New Zealand, and a low Australian dollar, are all factors contributing to strong price prospects,” he said.
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