Insights September 2024

Commodity Overview

• The trade lamb market was relatively stable throughout August. Increased supply is expected to apply downwards pressure to the market over the coming weeks. The arrival of new season lambs has so far been met with strong interest from buyers.
• Export volumes continue at record pace. Growth in the US and the Middle East is more than accounting for the decline in volumes to China and South Korea.

Trade lamb prices have been mostly stable over the past month, while heavy lamb markets have been trending higher. The National Trade Lamb Indicator (NTLI) finished August at 808 c/kg, down one cent from the start of the month. The NTLI peaked in the middle of July at 876 c/kg, before softening back to around its current position at the start of August. The flow of new season lambs has started to ramp up, although there is strong competition from buyers at this stage. Recent rainfall has also improved grower sentiment and offered some support to the market.

Australia's lamb processing rates eased over the past two months as abattoirs undertook winter maintenance. There was a weekly average of 420 thousand lambs processed in August, down 4.1 per cent from last year but remains 15.3 per cent higher than the 10-year average for August. Although processing rates were well down compared to the record volumes seen earlier this year. Lamb slaughter averaged almost 480 thousand head per week between April and June before slowing down in July and August. Processing rates will likely increase now that the scheduled winter maintenance is complete. This will provide some support to prices.

Dry seasonal conditions in parts of Victoria and South Australia earlier in the year may slow the influx of new season lambs. This could delay the increase of supply pressure as the spring flush comes through the market. The improved seasonal outlook will also give growers some confidence. The recent three-month outlook has most of the east coast being a 50 per cent or higher chance of exceeding median rainfall. This will support demand for sucker lambs as the spring flush flows through the market. Lamb prices are expected to trend side-ways to slightly lower with increased supply weighing on prices.

Australia's domestic consumption has remained steady as consumer prices start to respond to the higher saleyard prices. Domestic prices eased throughout the back end of 2023, although the recovery in saleyard prices is starting to appear at the retail level. Export demand remains strong, with a total of 30,124 tonnes exported for August. This represents a 5.2 per cent decrease from this time last year but sits 34.3 per cent above the five-year average for August. Australia has exported 249,818 tonnes of lamb so far this year, up 21.8 per cent from 2023. The US and the Middle East continue to be the major drivers of growth. Export volumes to the US are up 40.1 per cent year-to-date and are on track to exceed the record set in 2022. Export volumes to the Middle East are tracking 90.5 per cent ahead of this time last year. Demand from China has slowed, with year-to-date exports down 17.7 per cent from 2023 and are 13 per cent below the five-year average.

Mutton markets have eased over the past month, with prices expected to continue to trend slightly lower over the next few weeks. The National Mutton Indicator fell 10 cents throughout August to close at 366 c/kg. Weekly sheep yardings averaged over 83 thousand head in August, up 42 per cent from last year and 37.1 per cent above the average for August. Prices have picked up from the lows seen at the end of 2023, although remain below five- and ten-year average levels. Domestic demand has been supported by improved seasonal conditions and outlook, but certainly not to the levels seen during the restocking phase between 2020 and 2023. Export volumes continue at record pace. Australia exported 18,878 tonnes of mutton in August, with the year-to-date exports tracking 14.9 per cent ahead of this time last year. Mutton exports have grown to the Middle East and the USA, with volumes up 114.6 per cent and 45.4 per cent year-to-date respectively. Subdued demand from China continues to apply downwards pressure on prices.

Source: Meat & Livestock Australia