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Insights March 2020

2 March 2020 |Sheep & lambs
Sheep

Insights March 2020

2 March 2020 |Sheep & lambs
The March update provides an analysis of production and pricing trends for Australian sheep producers.

Overview

  • Lamb prices are expected to rise further and reach a record high peak in late winter when supply declines to a seasonal low.
  • Coronavirus may see Chinese consumers reduce spending on premium proteins including lamb and mutton, however any impact on domestic values is expected to be offset by domestic factors.
  • Sheep slaughter could decline as much as 40 to 45 per cent before the end of winter, as rains ease destocking pressure.

The eastern states trade lamb indicator has risen 24.7 per cent since the beginning of the year and is closing in on record highs. Rain-fuelled re-stocker and feeder demand could continue to strengthen in coming weeks, adding to
strong processor demand.

While demand is likely to strengthen, the seasonality of lamb supply suggests weekly slaughter rates could decline by 20-25 per cent before August, or further if producers opt to retain more ewe lambs to rebuild breeding flocks. Prices are likely to respond positively and reach a record high peak in late winter when supply declines to a seasonal low.

The ongoing spread of Coronavirus could weaken spending by Chinese consumers on premium proteins, and in turn may bring downward pressure to prices, however this is unlikely to outweigh the domestic drivers of prices.
Prices in Western Australia will continue to track at a discount to eastern markets due to the relatively poorer season, however values are expected to trend higher in response to the trend in eastern markets.

Mutton prices are expected to push further into record territory in response to declining supply and continued strong export demand, despite current values being on par with trade lamb values from 12 months ago thanks to a year to date increase of 26.9 per cent.

The strength of export demand was such that prices have tracked at record levels for most of 2019 despite elevated sheep slaughter in response to dry conditions.

Sheep slaughter has slowed in response to rainfall in January and February which provided relief from destocking pressures for many producers and could
decline by 40-45 per cent before the end of winter.

Export demand is expected to remain firm as mutton consumption is less susceptible to reduced discretionary spending which may result from any economic downturn and is contributing to filling the pork supply deficit resulting
from African Swine Fever in China.

   

Sources: Meat & Livestock Australia

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