Thursday, July 7, 2022

PULSE: Australia sets ambitious flock rebuild goals

New Zealand was once the global leader in lamb exports. But that accolade is slipping from our grasp as our only true competitor marches to the front of the line. Favourable weather conditions, an eye for the future and limited alternatives are driving Australia’s intention to rebuild its sheep flock. And much like their desire to wrangle the Bledisloe Cup from NZ, they are setting some ambitious goals.

Meat and Livestock Australia (MLA) released their half-year sheep industry projections earlier this month. What caught our attention was the forecast increase in sheep and lamb numbers in a very short space of time. Australian farmers have mostly been gifted with ideal weather conditions, conducive to retaining female stock for breeding purposes. After bottoming out at 64 million head last year, the report suggests a significant rebuild is already under way. Sheep and lamb numbers are expected to reach 68m this year, before lifting back over 75m by 2023. This effectively wipes out the decade-long decline in sheep numbers, with 2023 projections returning numbers back to 2003 levels. This rebuild packs a punch and takes some digesting. It clearly highlights the gaping hole developing between NZ and Australia in terms of intentions and desires for the industry.

It’s not just the favourable growing conditions encouraging the rebuild, bragging rights on the global stage remain an attractive incentive. Australia’s vast size means they’ve always had more sheep than us. Yet our stronger reliance on overseas markets meant we are generally the major player in the export scene, whereas Australia has a much larger domestic market to service first. This trend has been evolving over the years, and now Australia remains committed to expanding their export trade.

Based on a calendar year, Australia’s lamb exports since 2018 have flip-flopped between 264,000 tonnes and 281,000t. The projected volume for 2021 is 280,000t. In comparison NZ has held a slight but reducing advantage, falling from 318,000 to 312,000t last year. Based on the 2020 lamb crop, but subject to revision, 2021 lamb exports could be closer to 300,000t. By 2023, NZ’s annual lamb exports could be below 300,000t. This would be based on further falls in breeding numbers and subsequent lower lamb crop tallies.

In contrast, based on a strong rebuild coming to fruition, Australian lamb exports are forecast to reach 330,000t in 2023 – a 50,000t increase on this year. A lofty and ambitious goal that, if they can pull it off, will propel them to star status on the global market.

One could argue on varying differences in meat quality and productivity gains between the two countries, but that will likely become a moot point the smaller our lamb supplies become.

Recent Free Trade Agreement negotiations are also reinforcing Australia’s intentions on becoming a dominant leader in sheepmeat exports. If we thought competition from pine trees was a threat, playing second fiddle to Australia in negotiating export prices for lamb will be an even tougher pill to swallow.

If breeding numbers were a barometer for the health of the industry, then the outlook isn’t great. Yet these concerns are not being mirrored in Australia – they are simply rolling up their sleeves, determined to capitalise on strong and growing prices for sheepmeat within our global markets. Returns at the farm gate are buoyant, our markets could easily withstand greater lamb numbers without jeopardising prices, yet the industry is failing to find a captive audience.

At this pivotal time in the season, sheep farmers are in the crosshairs of some big decisions, many of which are being influenced or determined by age and rules and regulations outside of their control. Add to that recurring drought and it makes it difficult to get excited by the prospects of even greater future returns.

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