Insights May 2020
Insights May 2020
- Lamb and mutton prices will remain supported by tight supply until spring and strong restocker demand following
a wet start to the year.
- The typical winter rally in prices will be subdued in 2020 as reduced consumer demand through foodservice
channels both domestically and abroad adds downwards pressure on prices.
- Export volumes are expected to trend lower than 2019 due to reduced supply, but recovering demand in China
will help offset reduced demand from the US and the Middle East.
Tight supply will be the prevailing factor affecting sheep and lamb markets until spring as the industry moves into the seasonal low supply period. This will offer a level of support to prices amidst headwinds coming from consumer demand.
Weekly slaughter rates have been in a sharper decline than usual for most of the year, largely as a result of more producers retaining stock to begin flock rebuilding following improved seasonal conditions.
Tight supply will continue to be more pronounced for sheep as the high slaughter rates of the last two years will not be repeated now that conditions have improved.
Lamb and mutton production will not decline to the same extent as slaughter, as improved feed supplies will allow producers to hold stock longer and help lift average carcass weights. Regardless, sheep meat production will trend lower year-on-year and this will translate into lower export volumes.
In addition to tight supply, strong restocker demand will also continue providing support to lamb prices as more producers seek to rebuild depleted flocks to utilise available pasture.
Despite the support for prices, a softer rally in prices between May and August compared to 2018 and 2019 is expected due to weaker consumer demand in domestic and export markets resulting from COVID-19 measures.
Reduced consumption through foodservice channels, particularly in export markets such as the US, will weigh on heavy lamb prices until these channels recover.
There are positive signs for demand in China with higher lamb export volumes in March and April compared to the same months last year. Rebuilding strength in Chinese demand will help to offset the downwards pressure from weaker demand in the US and the Middle East.
Source: Meat & Livestock Australia