Producers set for rollercoaster ride

As WA sheep producers grapple with falling saleyard prices, cuts to supermarket lamb prices and dry seasonal conditions across many areas, turbulence in live export markets is another major blow, according to Sheepmeat Council of Australia (SCA) vice-president and WAFarmers meat section president Jeff Murray.

He said the Department of Agriculture, Fisheries and Forestry (DAFF) investigation into a local exporter after last week's release of Animals Australia footage from Kuwait was very concerning for the State's sheep industry.

Mr Murray said lamb prices had come off significantly, from about 560c/kg carcase weight at the start of the year to about 400c/kg at the start of this year's spring flush, and export prices for wethers were well down.

He said domestic meat processors were trading in a difficult global environment resulting from the global financial crisis in the United States and economic woes in several European markets.

He said live exporters faced significant challenges with the implementation of the Exporter Supply Chain Assurance System (ESCAS) and recent shipping disruptions in the Middle East blamed on the presence of scabby mouth.

Mr Murray said SCA was participating in a review of ESCAS and had spoken to Agriculture Minister Joe Ludwig to see if it could be further refined.

"It will take time to implement this system but in the meantime producers are taking a big hit and the continuing dry season in WA is not helping," he said.

"Everyone is trying to move sheep, especially wethers, to make room for ewes and lambs, and there are a lot coming on to the market."

Mr Murray said Australian supermarkets were not helping the plight of sheep producers by putting downward pressure on retail lamb prices.

"I noticed IGA had lamb forequarter chops on sale last week in the wake of Coles including lamb in its 'Down Down' campaign," he said.

"Everyone - butchers and independents - will be price matching and this will affect all red meat prices. We will have to watch this carefully."

Efforts by retailers to manipulate retail lamb prices, coupled with contracting farmgate lamb and wool prices, were tempting sheep producers to return to a traditional Merino base in their breeding flocks, WA Stud Merino Breeders' Association president Richard House said.

He said a $2/kg-plus fall in export prices for prime lamb in the past six months had caught many producers short and led to Coles and Woolworths entering the fray and forcing lamb prices lower.

"Producers have been told to lift their sheep numbers to address a critical decline in the State's flock," he said.

"But those who have invested in prime lamb, rather than dual-purpose genetics for their breeding flocks, are now finding, to their considerable cost, that breeding prime heavy weight lamb for overseas markets is no longer a guarantee of high returns."

Mr House said the global price decline for lamb was a stinging reminder to producers that they must avoid at all cost the lamb gluts of previous years.

He said Merino studs were meeting a strong new inquiry from commercial breeders seeking to hedge their returns from lamb with those from wool, rather than being wholly dependent on a prime lamb enterprise.