In 2024, the dynamics of the Australian sheep market could have a ripple effect on the UK, influenced by factors like El Nino and evolving global trade patterns.
Australian Production Trends
Australia’s sheep flock has reached its highest level since 2007, boasting 28.75 million head, as reported by Meat & Livestock Australia (MLA). This growth stems from a rebound in the breeding flock and improved scanning rates, following a period of destocking due to drought in 2019. In 2023, lamb processing in Australia surged by 9% year-on-year in November, as per ANZ Agribusiness.
Rainfall has boosted confidence among producers and processors, who had concerns about a dry season due to El Nino. Weather conditions will significantly influence both production and prices in Australia, potentially affecting the UK market. Continued rainfall could allow producers to delay lamb processing for better carcass quality, potentially stabilising supply and prices, especially in the first quarter of 2024. However, industry insights suggest a possible reduction in breeding ewes for 2024/25, which might lead to fewer lambs for processing and ease market pressure.
Price Movements
After a period of decline, deadweight lamb prices in Australia have rebounded. From a low of 221p/kg in mid-September 2023, prices rose by 117p by the second week of January 2024, sitting around 15p lower than the start of 2023.
Trade Dynamics
High supply and lower prices in 2023 have bolstered Australian exports. Year-to-date figures (January to November) show a 25% increase in total export volumes compared to 2022, reaching 5.18 million tonnes of sheep meat.
This growth is primarily driven by increased exports to China and the Middle East. Exports to China alone rose by 44%, while exports to the Middle East, including the United Arab Emirates, Saudi Arabia, Kuwait, Jordan, and Oman, also saw significant increases. Conversely, exports to the United States declined by 13%, indicating a strategic shift towards markets like China and the Middle East.
Implications for the UK in 2024
With the new UK-Australia trade deal in effect, there might be a slight increase in Australian sheep meat entering the UK market in 2024.
However, with only a 2% market share, the UK is not a primary destination for Australian exports. The growth of Australian exports to other regions could indirectly influence the UK market. There may be an increase in New Zealand products entering the UK and EU markets, depending on the price differential between the two Oceania countries. As Australia and New Zealand both target similar export destinations, the lower prices in Australia could lead to a shift in New Zealand’s export focus towards the EU and UK, depending on domestic demand.
