Insights September 2023

Commodity overview

• The sharp decline in lamb prices is expected to slow over the next few months, however the continued high supply of new season lambs will prevent any uplift.
• Consumer demand is beginning to pick up as retail prices start to respond to the drop in saleyard prices.

Australian lamb prices are expected to continue to trend lower over the next few months, with any significant uplift in prices still a fair way off. Lamb prices continued to decline in August, however the rate of decline appears to be slowing. The National Trade Lamb Indicator fell a further 63c/kg (-13 per cent) over the past month to 422c/kg, and now sits 383c/kg (-47.6 per cent) lower than the start of the year.

Lamb prices have been pushed lower due to a surge in supply. Lamb slaughter averaged just under 438 thousand head per week in August. This was up 8.9 per cent from August last year, and 28.8 per cent higher than the long-term average for the month. Year-to-date lamb slaughter is up by 7.4 per cent compared to 2022. Lamb supply has been elevated due to flock growth over the past three years, as well as carry over of lambs from last season.

Lamb supply is expected to remain elevated over the next few months. Supply will be supported by the large crop of new season lambs and the dry seasonal outlook which is likely to prompt farmers to destock to manage feed availability. The continued high supply of lambs entering the market will maintain downwards pressure on prices.

Consumer demand for lamb has been restricted so far this year by the comparatively high prices seen in supermarkets. Retail prices had been sticky despite the sharp decline in saleyard prices. However, retail prices have started to reduce more recently. Cost of living pressures have been limiting demand for lamb as consumers looked towards cheaper protein alternatives. Consumer demand is likely to pick up throughout spring as retail prices reduce. Exports continued to grow in August, with lamb export volume up 21.3 per cent from August 2022, and year-to-date exports up 9.7 per cent. Lamb exports to China are strong, up 37.8 per cent so far in 2023. Exports to the US continue to stage a recovery following a slow start to the year, with lamb exports increasing for a fourth consecutive month. Further improvements in demand from the high-value US market would provide some much-needed support for struggling lamb prices. 

Mutton prices continued to soften throughout August, with the mutton indicator currently at 141c/kg. This is the lowest mutton price since April 2013. Mutton prices have fallen 103c/kg over the past month (-42.3 per cent) and 388c/kg over the past 12 months (-73.4 per cent). The sharp decline in price follows a flooding of the market, with year-to-date mutton slaughter up 57 per cent from last year. The surge in mutton slaughter has flowed onto the export market, with year-to-date mutton exports up 49.5 per cent. China has absorbed most of the extra supply, with volume to China up 82.5 per cent so far this year. Mutton prices are unlikely to see any significant uplift over the next few months, as dry seasonal conditions may force farmers to destock, further enhancing the oversupply. 

Source: Meat & Livestock Australia