Insights October 2020
Insights October 2020
- Restrictions on Victorian processing capacity have eased which will allow Australian sheep and lamb markets to operate with greater certainty and provide confidence that the spring flush of lambs will be processed.
- Lamb supply is expected to increase 14 per cent to a seasonal peak, while sheep supply is expected to remain very tight.
- Lamb prices are expected to continue to trend lower year-on-year due to increased supply and subdued consumer demand in Australia and export markets.
Restrictions on workforce capacity in Victorian meat processing facilities eased from the end of September, providing greater confidence to markets with additional competition at saleyards which should take some pressure off prices as the industry approaches its peak supply period. The improvement in processing capacity to 90 per cent in regional Victoria and 80 per cent in metropolitan Melbourne and the relatively tight supply of sheep should allow for enough capacity to process the spring flush of lambs.
Lamb supply is expected to continue its upward trajectory with a further 14 per cent increase in eastern states weekly slaughter expected by December to reach a peak in-line with the five-year average and 1.5 per cent above the 2019 peak level. A year-on-year increase in supply is achievable based on increased lambing and survival rates compared to last year. Sheep slaughter is also expected to follow the typical seasonal pattern and trend higher, however a low national flock and producer intentions to retain breeding stock could keep slaughter rates up to 40 per cent lower year-on-year.
The Eastern State Trade Lamb Indicator (ESTLI) increased by 20.8 per cent in September, a welcomed correction following a 32.1 per cent decline between June and August. The recovery in prices, in conjunction with an increase in supply indicate an improvement in demand. Good rainfall in August and September, coupled with a very positive rainfall outlook, boosted demand from restockers and feeders which generated stronger competition in saleyards. Despite the recent rally, the ESTLI is 4.7 per cent lower year-on-year and is expected to continue to remain lower year-on-year as consumer demand, particularly through foodservice channels, remains subdued compared to last year. The outlook for consumer demand remains uncertain, particularly in export markets where key markets are at various stages of COVID-19 outbreaks and recoveries. There have been some positive signs for lamb exports in recent months including volumes to the United States trending higher year-on-year between June and September, and recovery of volumes to the Middle East since July.
Source: Meat and Livestock Australia