Australian Sheep Update October 2017
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Prices for lamb fell dramatically in late June before steadying in July to September to average only 1.7% below the same period in 2016. Prices had been trending significantly higher due to tight supply which has since eased as dry conditions have led to increased turn-off of stock.The spring flush of new lambs is now affecting markets and will cause the usual seasonal decline in price and a rise in production.
Winter was poor for livestock producers in most parts of Australia with the driest winter recorded since 2002. The outlook is more positive with average to above average rainfall expected for the rest of the year driven by the Pacific Ocean trending towards La Nina. The Bureau of Meteorology is expecting October to be wetter than average in eastern states and South Australia but dry in Western Australia. Temperatures are still likely to be warmer than average.
The value of sheep meat exports has trended higher this year as strong gains in export unit prices offset slightly lower volumes. The value of lamb exports to China has increased 61%, with improved unit prices adding to a 31% increase in volume. South Korea is also showing significant growth with export value more than doubling this year as lamb skewer outlets grow in popularity. This market still only accounts for 5% of export value. The US continues to be the major market with value up 8%.
Lamb prices had been volatile from July to mid-September before being very steady for the last month, showing resilience amidst increased production levels. Prices for all categories of lamb have declined in the last three months with restocker lambs showing the largest decline.
Mutton prices experienced the same decline as lamb prices in late June. Dry conditions have led producers to turn off some older stock, easing some of the tight supply pressure.
In the last five years, the national trade lamb indicator (NTLI) has averaged an 8% drop in October and 2% drop in November due to increased supply during spring. An average seasonal decline would see the NTLI fall to an average of 545c/kg in November.
Lamb production from May to August has been 10% higher than the same period in 2016 as dry conditions have led to increased slaughter. For the year to July, lamb slaughter is 2% below 2016 and production is 0.4% lower, partially offset by a 2.6% increase in average carcass weights. Slaughter rates are expected to trend upwards in October and November as new season lambs are finished. Poor feed conditions during winter will have affected growing rates which could result in lambs being finished later.
Mutton production also increased dramatically from May to August. Production during this period was 28% higher than 2016 due to increased turn-off of older stock. This came after production for the first four months of the year was 15% lower than 2016. Producers will be looking to hold younger ewes and ewe lambs to increase flock sizes if seasonal conditions allow.