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The national sheep flock has declined by an estimated 23 million head
or 21 percent in the last six years, from 111 million head in June 2001
to an estimated 88 million in June 2007.
MLA forecast: Lamb outlook remains bright
Strong demand for lamb both in Australia and around the world, combined with the prospect of an end to the drought is set to push up returns for lamb producers, according to the latest forecasts from Meat & Livestock Australia.
Releasing the mid-year update to its 2007 Sheep Industry Projections today, MLA has reported that domestic and overseas consumers continue to look to Australia to supply the steady growth in global demand for lamb.
MLA’s chief market analyst Peter Weeks said that although demand for lamb remains strong, Australian lamb supplies are set to fall significantly over the remainder of 2007 through to spring 2008 as a consequence of the poor breeding season.
“The best winter rains for many years across lamb producing regions in eastern Australia have improved seasonal conditions significantly, providing the confidence for producers to start rebuilding sheep flocks,” Mr Weeks said.
“This rebuilding will ultimately lead to a drop in numbers on the market which should push up prices in the short term and the only thing likely to prevent prices from exceeding the record levels set in 2003 is the high Australian dollar.
“While further follow-up rains are needed across almost all areas, particularly in south-west WA, the outlook for the second half of 2007 and into 2008 is vastly improved from 12 months earlier.”
The largest price increases are likely to be in the lighter lamb categories, which were the hardest hit by the recent drought. Lighter lamb supplies are expected to be reduced substantially, with the improvement in seasonal conditions and increased grain supplies enabling producers to finish lambs to heavier weights.
A forecast increase in the proportion of heavier lambs offered in 2007-08 should be matched by strong demand, helping prices for this category to also average above 2006-07 prices.
With rising demand offset by lower Australian lamb supply and higher prices, total lamb exports are expected to ease back 2 percent in 2008, to 146,000 tonnes. However, the forecast increase in the number of heavier lambs will suit the US export market, with shipments to the US forecast to increase 2.4 percent, to 42,500 tonnes in 2008.
After two years of strong expansion Australian lamb exports to Japan are forecast to decline by 16 percent in 2007, to 10,000 tonnes. However, with demand expected to stabilise and the A$ to fall modestly against the yen through 2008, lamb exports to Japan in 2008 are forecast to remain steady at around 10,000 tonnes.
Mr Weeks said that farm income will have been low, or even negative, for many lamb specialists in 2006-07, however this situation should turn around if the drought breaks.
“Lamb producer incomes have been low because the drought really impacted on the condition and price of lambs sold and there were high expenditures on feed, agistment, water and other drought-related costs. However, producer incomes should return to historically high levels once the drought breaks, assisted by better lamb quality, higher prices and lower costs,” Mr Weeks said.
Providing the drought breaks, the strong positive sentiment among the industry is expected to see lamb production grow steadily beyond 2008, allowing for expansion in both domestic consumption and export volumes. The expansion is likely to be slower than anticipated prior to the severe 2006-07 drought, because of the depletion of the core Merino breeding flock.
As a result of the five-year drought the Australian sheep flock has been severely depleted and is at its lowest level in 80 years. The national sheep flock has declined by an estimated 23 million head or 21 percent in the last six years, from 111 million head in June 2001 to an estimated 88 million in June 2007.
Mutton production is forecast to fall significantly during the second half of 2007, which is expected to see both exports and domestic usage decline. Tighter supplies of sheep will see mutton prices increase and remain at historically high levels through the medium term, especially if seasonal condition remains favourable.
Mutton exports are forecast to decline 18 percent in 2007, to 133,000 tonnes, with shipments in the second half of the year falling back 35 percent. Mutton exports to Australia’s biggest export market, the Middle East, are forecast to decline 7 percent in 2007, to 40,000 tonnes, and a further 23 percent in 2008, to 31,000 tonnes.
Australian live sheep exports in 2007 are forecast to reach 3.53 million head – a reduction of 15 percent on 2006. Contributing to the decline in shipments for the year will be the reduced turn-off of sheep, the rising A$, shipping constraints and increased competition.
Live sheep shipments to Saudi Arabia in 2007 are forecast to fall 22 percent, to 935,000 head, while live exports to this market in 2008 are forecast to rise slightly, to around 950,000 head.
As a result of steady demand live sheep shipments to Kuwait in 2007 are forecast to remain steady at 965,000 head, however tighter supplies through 2008 are forecast to have shipments to Kuwait back 7 percent in 2008, to 900,000 head. Similarly, live sheep exports to Kuwait in 2007 are forecast to decline 2 percent, to 545,000 head, and will fall back a further 8 percent, to around 500,000 head in 2008.
Ends
Released by: Damon Whittock, MLA Media Affairs Manager – ph. 02
9463 9368.
Media contact: Peter Weeks – ph. 02 9463 9167.
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