Insights August 2021
Insights August 2021
- Lamb and mutton prices trended higher in June and July toward a winter peak but should ease in August as supply begins to increase.
- Prices in July were supported by strong export demand which helped absorb above average lamb supply.
Australian lamb prices typically increase during winter and this year has been no exception. The Eastern States Trade Lamb Indicator (ESTLI) rose 11 per cent from the start of June to the end of July. This increase saw the ESTLI return above 900c/kg for the first time since June 2020. The National Mutton Indicator (NMI) also pushed higher and bounced between 675-702c/kg in July. Both lamb and mutton prices were higher than 12 months ago when prices were lower due to restricted processing capacity in Victoria.
Lamb prices performed remarkably well in July given the level of supply. Although average weekly lamb slaughter in July declined 6.8 per cent from June, it was 15.7 per cent above July 2020 and 1.6 per cent above the 10-year average. Average weekly yardings were likewise elevated in July, 49.7 per cent above July 2020 and 18.5 per cent above average. This was primarily driven by increased supply in New South Wales. The typical seasonal trend of lower supply through winter was evident, albeit to a much lesser degree than usual. Sheep supply remained tight in July with average weekly slaughter 15.5 per cent below average. However, this was up 57.1 per cent from the very tight supply seen 12 months ago.
Strengthened export demand has been a major factor supporting high lamb prices. Lamb export volume in July was 36 per cent higher year-on-year despite a 7.5 per cent month-on-month decline. Resurgent demand from the United States (US) is leading the overall strength in demand. Lamb exports to the US in July were 48.9 per cent higher year-on-year and up 21.5 per cent for the year-to-date. Demand from China is also firm with exports in July in 25.6 per cent higher year-on-year, but year-to-date volumes are lagging by 3.2 per cent. Growth in year-to-date exports to the US and emerging markets such as Hong Kong, Taiwan and Papua New Guinea has offset continued weakness in Middle Eastern demand. Lamb exports to the Middle East in 2021 are 33.8 per cent below 2020 and are unlikely to improve until significant international travel resumes. Mutton exports in July were 25.9 per cent higher year-on-year but kept below average by tight supply.
Lamb prices are likely near their winter peak and are expected to begin to ease in August as new season lamb supply lifts. Lamb supply is expected to increase compared to last year due to higher lambing rates. However, wet conditions could slow the onset of the spring flush while also supporting strong restocker demand. The impacts of a wet season coupled with strong export demand should support strong lamb prices throughout spring, albeit lower than the current winter peak. Mutton prices are likewise expected to ease as supply improves in spring. Support from strong export demand and restocker buyers should keep mutton prices in a high range.
Source: Meat and Livestock Australia