Elders’ Business Intelligence Analyst Richard Koch discusses his data driven forecast for the Australian sheepmeat market this summer.
Key points
- Unprecedented sheep turnoff this spring depressed prices across the sheepmeat complex.
- Tighter mutton availability will shift processor demand to slaughter lambs through summer.
- Lamb slaughter will move back towards five year averages supporting prices across the sheepmeat complex.
- Sheepmeat values are highly responsive to changes in supply.
- Capping lamb price rises will be the global cost of living crisis and increased sensitivity of demand to price.
- Light and restocker lamb discounts will remain larger than normal owing to relatively larger supplies compared to slaughter lamb categories.
Sheep slaughter levels cruel prices across sheepmeat complex during spring
Heavy and sustained spring sheep turnoff meant that our slaughter lamb forecasts have missed the mark by 50c/kg for heavy lambs and $1/kg for trade lambs. We were closer to the mark for light lambs and restocker lambs but not for the reasons we outlined. The big miss was on sheep prices where an unprecedented turnoff dragged down mutton values well below forecast levels.
This chart shows weekly Australian sheep slaughter levels 2024 vs 2023 and five year average. Source: NLRS.
The large increase in mutton supply saw sheep prices fall, increasing mutton processing margins and encouraging local processors to increase sheep kills at the expense of lambs. The fall in mutton costs and strong global demand for low-cost meat proteins, meant that our mutton exports were well received globally as the world’s cheapest form of meat protein.
Light lambs continue to be the beneficiary of strong demand for mk (Muslim kill) lambs in the Middle East where governments across the regions are using lamb imports to quell rising levels of food inflation. The only caveat to continued support for light lambs is a recent slowdown in exports to Iran as airfreighting proved too risky given the flare up in the Israel/Iran conflict. With tensions calming, it is hopeful that lamb exports to Iran can resume at previous levels.
Restocker and store lambs were well supported through spring owing to their large discount to slaughter lamb values and increased demand from graziers looking for stock to put on frosted and failed crops.
Australian production key determinant of prices
Owing to Australia’s position as the dominant global sheepmeat supplier, unlike other agricultural exports where we are a price taker, our level of supply is the key influence on our sheepmeat values.
This chart shows Australian sheepmeat production vs sheepmeat prices. Source: MLA.
As we move into the New Year, sheepmeat markets will be supported by lower supplies as the impact of flock liquidation in 2023 and 2024, lower ewe matings and lower lambing percentages due to poor seasonal conditions leave a hole in supplies during the summer quarter. The very heavy sheep processing levels of the past few years means the age profile of the sheep flock is very young which will dramatically reduce the availability of cull ewes in coming years.
This chart shows weekly Australian lamb slaughter levels 2024 vs 2023 and five year average. Source: NLRS.
Heavy and trade lambs will continue to be well supported owing to lower than normal availability due to the difficulty producers have had putting weight on lambs due to the tight spring. These prices should continue to rise over the Christmas/New Year period and into 2025 as supply tightens across the sheepmeat complex. Heavy weight export lambs will maintain an abnormally large premium over other lamb slaughter categories.
Light lambs are in demand as a cheap source of protein as governments across the Middle East region turn to lamb imports to help bring down food inflation. Hopefully, tensions across the Middle East can be quickly resolved and allow for the resumption of lamb trade into Iran at previous levels. Prices will rise over the forecast period but will maintain an abnormally large discount to other slaughter lamb categories owing to larger relative supplies.
Store and restocker lambs should also be well supported. Sales of self-feeders for lamb feeding have spiked in recent weeks as producers see the potential of using cheap barley to finish lambs to slaughter weights, targeting the hole in early autumn supplies discussed above. Again, the relatively large availability of restocker lambs will continue through the summer quarter and mean that restocker lamb prices will carry a larger than normal discount to slaughter categories.
Mutton will be the biggest beneficiary of tighter supplies through the summer quarter. The large discount that mutton values have carried to lamb prices of over $5/kg dw at points through the Spring, will narrow back to the normal around $3 to $4/kg as supplies tighten, providing good support for mutton values over the forecast period.
The information contained in this article is given for the purpose of providing general information only, and while Elders has exercised reasonable care, skill and diligence in its preparation, many factors (including environmental and seasonal) can impact its accuracy and currency. Accordingly, the information should not be relied upon under any circumstances and Elders assumes no liability for any loss consequently suffered. If you would like to speak to someone for tailored advice relating to any of the matters referred to in this article, please contact Elders.
