New Zealand could face stiff competition from Australian sheepmeat exports for a couple more years.
Following three years of above-average rainfall, the Australian flock has grown to 78.75 million, the largest since 2007, of which 46 million are ewes.
This has prompted Meat and Livestock Australia (MLA) to forecast that sheepmeat production will remain high for the next two years.
An influx of higher volumes of Australian sheepmeat onto weak global markets, especially China and the United States, is keeping prices low with little prospects of an early reprieve.
In its July update, MLA forecast a sharp lift in production and slaughter volumes, with 21.9 million lambs available for slaughter this year, rising to 22.4 million next year, the highest since 2018, but easing slightly to 22.2 million in 2025.
The sheep slaughter is also expected to increase in the next three years, from 7.8 million this year to 8.7 million next year and 9.8 million in 2025.
In September Australia exported 31,503 tonnes of lamb and 16,435t of mutton, up 26% and 30% respectively from September last year.
Tim Jackson, a Global Supply Analyst at MLA, said regular rain in the past three years has allowed the flock to be rebuilt.
“MLA’s July Sheep Industry Projections currently forecast sheepmeat production of 737 million tonnes in 2023, rising to 765 million tonnes in 2024.
“Export volumes have remained strong, as exports to China and the Middle East and North Africa region have grown substantially over 2023.
“Exports to the United States have been softer this year than in 2022, but prices in the US market have largely held.”
Saleyard demand and prices have eased.
“Prices have eased substantially over the past year, especially for mutton and re-stocker lambs,” he said.
“The sheep flock is at its largest since 2007, processor capacity is somewhat limited by labour constraints, and changed weather patterns over the past year have all contributed to easing prices.”
The mutton indicator price has fallen since November last year from AUS455c/kg/cwt, with the average price of $129/head, to 103c/kg/cwt and an average price of $30/head this week.
Over the same period the trade lamb indicator has slipped from AUS812c/kg/cwt and an average price of $193/head to 490c/kg/cwt and an average price $116/head.
Bottlenecks are developing at meat processing plants as they struggle to find staff, and these have been accentuated by rapidly drying conditions in Queensland and northern New South Wales.
The main sheep farming areas of southern New South Wales and Victoria have had regular rain but there is concern about the impact of the looming El Niño weather system.
“The Bureau of Meteorology [BoM] has announced an El Niño weather event and a positive Indian Ocean Dipole, both indicators of dryer conditions in Australia,” Jackson said.
“The BoM is currently forecasting a relatively hot, dry summer, in contrast to the cooler, wetter conditions we’ve seen over the past few years.”
Thirty years ago the Australian domestic market took 60% of sheepmeat production. Now it accounts for a third as exporters chase higher paying international markets.
But weaker prices are fuelling domestic demand.
“The sales performance of Australian lamb and beef in the domestic market is very strong, with both proteins growing in sales volume and overall value,” Jackson said.
Meanwhile, a petition organised by the US-based lobby group R-Calf USA was this week sent to the US Trade Representative asking for an investigation into whether the volume of imported lamb and mutton is causing “serious injury to the domestic sheep industry”.
The petitioners note that between 2018-2022, US consumption of lamb and mutton increased 17% but US sheep and lamb inventory fell 4%. The letter states imported sheepmeat increased 31% between 2018 and 2022.