Meat & Livestock News

Positive Shift in Australian Sheep Meat Market Benefits New Zealand Lamb Industry

lamb leg on the wooden board prepared for cook tomato broccoli salt top view

Recent widespread rainfall in Australia, including the extraordinary 2m downpour from Cyclone Jasper in December, has significantly eased the drought conditions that have long plagued the country. This change in weather has led to a notable decrease in the supply of Australian sheepmeat, which had been flooding the global markets since mid-last year.

Before the rains, Australian farmers faced dire circumstances, with some resorting to culling ewes due to the severe dry conditions. This led to an oversupply of livestock at processing plants, causing prices for ewes to plummet to as low as a dollar per head.

Willie Wiese, Chief Executive of Alliance Group, observed a recovery in farmgate prices following his return from Western Australia in late December. He noted that lamb prices have risen, with mutton prices reaching A$2.50 per kilo, a significant increase from their previous low. Wiese attributes this recovery to the improved weather conditions.

This shift is a welcome relief for exporters in New Zealand, who have been contending with increased supply from Australia, their major global competitor, and weak consumer demand in key markets like China. In October, Australian mutton exports to China surged by 57% compared to the same month in the previous year, while lamb exports increased by 14%.

Despite the slowdown in Australian production, Wiese, who visited China in late November, cautioned that a price recovery for exporters might not be immediate. He explained that the Chinese market is still saturated with lower-priced inventory, which needs to be cleared before higher-priced products can gain traction.

Mike Cleary, a Sydney-based director for New Zealand meat trader Latitude Commodities, echoed this sentiment, noting a complete turnaround in livestock markets. He reported significant rainfall across most Australian states, which has led to a replenishing of previously dry storage dams.

This has resulted in processors paying higher prices to secure livestock, with farmers now receiving up to A$7 per kg CWT for lambs, a substantial increase from the lows of A$4.50 to A$4.80 per kg at the end of October.

However, Cleary does not anticipate lamb prices returning to the highs of A$8-$9 per kg CWT seen between 2020 and early 2023, citing current global meat values.

Wiese views the reduction in Australian production as a positive development for the unstable global sheep meat markets. However, he warns that the potential establishment of the El Niño weather pattern, which could bring hotter, drier conditions to much of Australia, may mean that this reprieve could be short-lived.

He suggests that while there might be short-term price increases once the current inventory is cleared, the eventual need for Australia to clear all residual capital stock remains a looming threat.

Meat and Livestock Australia forecasts that the mutton kill in Australia for 2024 will be 10% to 15% lower than this year, indicating potential future shifts in the market.