Latest sheep market update

Processors and exporters manage tight sheepmeat supply

Prices across the sheep and lamb complex have held relatively stable as the industry navigates its way through tight supplies and disruptions to key export markets in the Middle East. 

Lamb values have largely ranged from $10.50 to 11.50/kg dressed weight (dw), while mutton prices have remained between $7.50 to 8.50/kg for most of the year. Processor demand has adjusted as prices moved out of these ranges, helping maintain generally stable values at traditionally high levels throughout autumn.

Mutton kills have been even more depressed – falling 36 per cent year-to-date, as an improvement in seasonal conditions across key areas is turning producers towards rebuilding.

In terms of export performance for the year so far, although overall lamb export volumes are down by 11 per cent, Australia has increased the proportion of exports going to higher value markets:

• the United States (US) +2 per cent, 
• China +4 per cent and 
• United Kingdom (UK) +7 per cent.

These three countries combined with markets in the Middle East take 85 per cent of all Australian exports.

While supplies remained constrained for now, there may be some relief in sight approaching spring. Elders’ agents are reporting that that have never seen so many good, healthy lambs, feasting on some of the best fodder crops you will likely see. In southern areas where water supply has been an ongoing issue for the past 2 to 3 years, dams are slowly filling and creeks are beginning to flow as seasonal conditions turn for the better. Temperatures have remained very mild allowing pasture growth right up until the last few weeks, as frosts become heavier and more frequent.

While lamb availability will remain somewhat constrained by the heavy reduction in flock numbers over the past three years and the retention of ewe lambs for flock rebuilding, lamb supply is expected to improve this spring compared to last year. Favourable seasonal conditions are also likely to bring forward turnoff. 

US market enjoying good supply of heavy lambs

A unique quirk to this season is that there is an abundant supply of heavy weight lambs aided by increased lamb feeding and the best autumn for many years across southern Australia.

Lamb is having its moment in the US, perhaps driven by the high price of beef, and a new generation of consumers who seem to enjoy lamb as a red meat alternative to beef.  

The other trend that is assisting sales into US is its focus on higher value cuts out of heavy carcases – so the US market is the least likely to see a decline in volumes over the next quarter. 

Consumers in the segments that Australian lamb targets in the US are not as price sensitive as other export markets. US domestic lamb prices are averaging around 50 per cent higher than last year, and about the same amount about the five-year average as US domestic lamb supply remains in terminal decline.

Supply tightness push trade lambs higher but consumer resistance will limit further gains

Rain breathes life into restocker market and creates options for producers

A steady improvement in seasonal conditions have made restocker lambs one of the most valuable commodities in the Australian agricultural sector. Fodder crops that look like you can walk across all through central and south-east Australia have created fierce competition for store lambs that are also in demand from a dedicated lamb feeding sector.

Will higher mutton prices encourage flock rebuilding?

The question is: does this illicit a supply response?

With an ageing demographic that have been battling against low margins for decades, finally getting a chance to make money or exit the industry on their terms, the answer is not so simple.

The economically logical answer to supernormal profits (and the reasons why we have livestock cycles) would be to build up productive capacity. 

Some Elders’ agents suggest that at current prices of >$300/hd, a solid proportion of this year’s ewe lambs are heading to slaughter, with many industry stalwarts not interested in rebuilding and question marks about the preparedness of the next generation to take the job on.

Well known grazier, Nigel Kerin recently put the returns (EBIT – Earnings Before Interest and Tax) on running a sheep operation in southern NSW at $637.50/ha. Not many ag enterprises can match that, and over time this may entice a few back to the fold.

Ewe prices and lamb supply this spring will tell us whether there is any serious flock rebuilding happening.

*Disclaimer – important, please read:

The information contained in this article is given for general information purposes only, current at the time of first publication, and does not constitute professional advice.  The article has been independently created by a human author using some degree of creativity through consultation with various third-party sources.  Third party information has been sourced from means which Elders consider to be reliable.  However, Elders has not independently verified the information and cannot guarantee its accuracy.  Links or references to third party sources are provided for convenience only and do not constitute endorsement of material by third parties or any associated product or service offering.  While Elders has exercised reasonable care, skill and diligence in preparation of this article, many factors including environmental/seasonal factors and market conditions can impact its accuracy and currency.  The information should not be relied upon under any circumstances and, to the extent permitted by law, Elders disclaim liability for any loss or damage arising out of any reliance upon the information contained in this article.  If you would like to speak to someone for tailored advice specific to your circumstances relating to any of the matters referred to in this article, please contact Elders.