Positive outlook for Australia’s sheepmeat industry
Currently lamb prices for Australia’s overseas customers are going up being pressured by the tight supplies, still, analysts consider that the sheepmeat industry will record further positive results. Despite a noticeable increase in pricing in 2017, lamb and mutton exports reached record levels in value, increasing by 20% and 45% respectively in the first 11 months, with the US and China being Australia’s most important customers.
“Lamb and sheep slaughter are both expected to drop slightly in 2018, to 22.5 million head and 7.2 million head, respectively. A small increase in lamb carcase weights will help offset the lower slaughter, resulting in stable lamb production at 514,000 tons carcase weight (cwt). It is a slightly different story for sheep, with carcase weights expected to ease from record highs in 2017 back towards their longer term trend. This, combined with declining slaughter, suggests a small reduction in mutton production to 177,000 tons cwt,” MLA’s report read.
Furthermore, for 2019, analysts expect the scenery to change, meaning the volumes for sheepmeat exports to record new heights in volume, based on the increase of production and increase in demand from developing countries in Asia and the Middle East. Demand is expected to also rise in the US and Korea. The main factor that could have an impact on the evolution of the Australian sheepmeat trade mentioned by analysts will be still given by the movements in the Australian dollar or the sheepmeat production from New Zealand. The report states that the supply situation in New Zealand is an important factor in Australia's competitiveness in the global market. New Zealand (NZ) and Australia are the world's largest exporters of sheepmeat, accounting for approximately 71% of global exports in 2016-17 (OECD-FAO).
As for Australia’s mutton exports, analysts at MLA predict that they will reach a lower level in 2018 because of a decline in slaughter numbers. “The export market now accounts for above 95% of mutton production and this is only expected to increase in future years.” Australia exports its mutton to mainly China, Malaysia and Saudi Arabia. These markets represent a total share trade of over 40% of the country’s mutton exports.
Australia's largest lamb importer remains the US in 2017, when Australian lamb exports reported the sixth consecutive year of growth on this market. Lamb exports have jumped from 39,000 tonnes swt in 2013 to 55,000 tons swt in 2017.
The demand for Australian sheepmeat in China, another key market for Australian lamb, was strong in 2017. After three years of decline, the exports to this country grew by 40% to 83,000 tons swt, "with value also up a massive 90% year-to-November, on the back of short domestic supplies."
Australia’s sheepmeat exports to the Middle East
Analysts at MLA talk about a stability across all the major markets in the Middle East which was reflected in Australia’s sheepmeat trade within this region, in 2017 the sheepmeat exports tracking in line with the previous year at a level of 108,000 tons swt. In this regard, chilled products saw record sales of 60,000 tons swt in 2017, a significant increase compared to a year ago. The countries with the strongest demand for Australia’s chilled products were Dubai and Qatar. In addition, for the first time since 2013, Australia was able to export chilled products also to Iran.
“2017 saw a continuation of the recent trend towards premium products to the Middle East that has seen Australia’s export price per kilogram almost double in the last 10 years, reaching A$6.70/kg in 2016-17. This has been driven by a combination of increasing disposable incomes, westernisation, large expat professional populations and developing tourism sectors across the Middle East. “
MLA analysts say further that it is likely that 2018 will see ongoing demand for high quality chilled carcases, underpinning demand from the region.
The Middle East will remain a significant market for Australian sheepmeat, but will face competition from Australian restockers for light lambs next year and increased competition from the growing presence of cheaper product from Romania and North Africa.
Australia’s live sheep export
According to MLA’s data, Australia’s sheep exports reached 1.89 million head in 2017, up by 3% year-on-year. The increase was mainly based on the exports to Qatar and Omanm while exports to Kuwait, Jordan and UAE reported a slight downfall. Whereas, due to high Australian prices, Malaysia started importing sheep and goat products from suppliers in Thailand and Myanmar.
In 2017, Turkey became the third largest recipient of Australian sheep. Last year, the live sheep exports to Turkey were just above 198,000 head. Turkey imports live sheep mainly from Romania and Australia, the Turkish government showing increased preference for the quality of of Australian sheep.
MLA’s report further states that there is a possibility of Saudi Arabia and Iran both taking their first exports of Australian sheep under Export Supply Chain Assurance System (ESCAS). The supply and pricing out of Australia will determine “how active either of these markets become.”
The Australian live sheep trade will be limited by the ongoing flock rebuilding and continuing high local prices, although a strong demand has been observed and there is also a potential for opening new markets. In this situation, MLA expects overall live sheep exports to be flat in 2018 at 1.9 million head.
Looking ahead
For the next period, analysts at MLA stressed that Australia's main focus will be maintaining favourable acces conditions. A key lever in improving Australia's sheepmeat's global competitiveness is further reducing both economic and non-tariff barriers."In the year ahead, Australia is engaged in a number of trade talks globally – priorities include the EU, in anticipation of the launch of the Australia-EU FTA, and UK, regarding the upcoming ‘Brexit’," MLA's report concludes.
In the following years, MLA analysts expect both lamb and mutton exports to continue to follow domestic production shifts. Australian exports are likely to plateau this year before building up again starting with 2019.
The increase in both sheepmeat production and prices in 2017 highlights the strength of the market. Current market signals are showing no significant change to international demand in 2018 and with the anticipated softer overall sheepmeat production, MLA says that this year should see continued support for prices.
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