Insights September 2021
Insights September 2021
- Australian lamb prices have started spring in a very strong position but are expected to decline as supply increases in coming months.
- Demand from export markets and restockers should remain firm but risks have arisen from Australian COVID-19 outbreaks.
The Eastern States Trade Lamb Indicator (ESTLI) appears to have begun its seasonal decline after peaking at 960c/kg in late-August. After a 3.4 per cent decline from that peak, the ESTLI was 37 per cent higher year-on-year in the first week of September. The National Mutton Indicator (NMI) likewise started to trend lower with a fall of 6.8 per cent in the last month. The NMI is still 23 per cent higher year-on-year and 25 per cent above the five-year average.
Prices will continue to decline in the coming months as the spring flush of lambs come onto the market. Lamb supply was elevated in winter with average weekly slaughter in August up 10.2 per cent year-on-year and 7.6 per cent above the five-year average. The average seasonal pattern indicates a 20-30 per cent increase in lamb supply from early September to the end of the year is likely. Increased lambing rates should sustain supply above 2020 levels for the rest of the year. Sheep supply however is expected to remain tight. Depleted breeding stock coupled with increased stock retention will restrict sheep supply. Average weekly sheep slaughter in August was 12.4 per cent higher year-on-year but down 28.5 per cent on the five-year average.
While prices may decline due to increased supply, support will come from strong export demand. July was a record month for lamb exports with strengthening demand evident from the US and China. Average export prices hit a record of $10.36/kg despite a record high volume of almost 30,000 tonnes being exported. Higher prices coupled with increased volume drove a record monthly export value of $309 million - 88 per cent above July 2020. The value of lamb exports to both the US and China in July was more than double that of July 2020 following strong growth throughout the year to date.
In addition to strong export demand, prices will also be supported by firm restocker demand. A wet outlook for spring, coupled with a good feed base coming out of winter should fuel confidence for restocker buyers.
Australian sheep producers are well placed coming into spring. However, short-term risks arising from COVID-19 outbreaks in Australia will add a degree of caution. An 80 per cent limit on workforces in Melbourne abattoirs may weaken demand somewhat. Short-term closures of abattoirs and saleyards have occurred in New South Wales recently due to COVID-19 cases. Further supply chain disruptions could also cause some volatility in markets.
Source: Meat and Livestock Australia