Thursday, August 18, 2022

Aus flock rebuild ups pressure for NZ in US market

Neal Wallace
Meat and Livestock Australia forecasts a recovery to just under 79 million next year – a level last seen in 2006-07.
AgriHQ senior analyst Mel Croad attributed a decline in the amount of chilled meat exported to shipping disruption and staffing problems in plants where companies have forgone adding value to ensure processing speed and efficiency.

The speed with which Australian farmers have rebuilt their sheep flock has surprised some observers – but also prompted a warning that our Trans-Tasman neighbours are set to export more lamb than ever before.

Decimated by drought, the flock hit a low of 64 million in 2020, but Meat and Livestock Australia (MLA) is forecasting a recovery to 76m as at June 30 this year and a further increase to just under 79m next year, a level last seen in 2006-07.

In 2017 the flock numbered 72m.

AgriHQ senior analyst Mel Croad said Australia’s extra lamb production is being exported, primarily to the United States.

She said in 2016 Australia processed 23m lambs and exported 242,000 tonnes. In 2022 it is forecast that 22m lambs will be processed, leading to record exports of 308,000 tonnes with projections that for next year that export volumes could hit 310,000 tonnes.

“They are rebuilding their sheep flock and that means more lamb will be available to supply export markets,” Croad said.

As a comparison, in 2020-21 New Zealand exported 309,000 tonnes.

Traditionally Australia has exported about 250,000 tonnes, but Croad said it appears its domestic market is fully supplied.

Read: A look at lamb markets around the world

In 2016, 47% of Australian lamb was exported. This year it is expected to be 56%.

Aided by a favourable season, Australian lambs are heavier, averaging 24.9kg carcass weight compared to 22.5kg.

Croad said this is starting to affect the US market, where some larger-sized cuts of Australian lamb are undercutting comparable NZ lamb cuts, and she warned this has the potential to change market dynamics for NZ.

“If we maintain our export volumes, Australia over the space of five or six years has added a further 60,000 to 70,000 tonnes of export lamb onto global markets,” she said.

Since covid, the US market has been one of NZ’s best performing markets.

“NZ exporters are now talking about seeing more Australian lamb in the US market,” she said.

She said at a time when Australia is expanding its flock, NZ sheep numbers continue to decline, a process accelerated by forestry companies buying farmland.

Meanwhile, the percentage of chilled NZ lamb being exported has declined significantly this season.

She said chilled meat is financially lucrative for companies, and as a percentage of exports equates to about 27% at the peak of the season, reducing to 13% at the low point.

In the past two months that percentage has fallen to between 8% and 10%.

Also read: Quit lambs soon, processors warn

Total chilled lamb exports this season to June are the lowest on record at 34,000 tonnes, well down on the five-year average of 50,000 tonnes.

She attributed this decline to shipping disruption and staffing problems in plants where companies have forgone adding value to ensure processing speed and efficiency. 

There have been cases where chilled consignments have had to be frozen because shipping delays have reduced the product’s shelf life.

While export values have remained elevated, Croad said she can see some road bumps ahead in the form of competition from Australian lamb, and ongoing shipping issues.

Unlike the past two years, when demand has been consistent throughout the year, global red meat markets are reverting to normal buying patterns, such as demand easing during the northern hemisphere summer holidays.

“We are coming off two big years of heightened demand in all our export markets, but we are now seeing some changes,” she said.

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