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Sheep meat: September quarter 2021

Harry Coë

Strong export demand in the US and the Middle East is expected to support high lamb prices

Key points

  • Lamb and sheep saleyard prices are likely to remain high in 2021–22.
  • Demand for lamb is expected to strengthen in the United States and the Middle East.
  • Chinese demand for mutton is expected to weaken due to greater availability of pork in China.
  • Flock rebuilding in the eastern states is expected to continue, following high rainfall in sheep-producing regions.

Saleyard prices are likely to remain high due to strong demand

The national trade lamb saleyard price is forecast to remain high in 2021–22, rising by 1% to 791 cents per kg. The national mutton saleyard price is forecast to fall by 2% to 597 cents per kg (Figure 1). In nominal terms, lamb prices in 2021–22 are expected to be the second highest ever recorded, while sheep prices are expected to be the third highest.

Figure 1 Lamb and sheep saleyard prices, 2012–13 to 2021–22
In 2021–22 lamb prices are forecast to rise slightly but remain below 2019–20 levels. Sheep prices are forecast to fall slightly.
a National Trade Lamb Indicator. b National Mutton Indicator. s ABARES estimate. f ABARES forecast.
Sources: ABARES; Meat & Livestock Australia

Lamb prices are expected to rise slightly in 2021-22 following the economic recovery in the US and the Middle East. These regions are Australia’s major lamb markets. However, mutton prices are expected to fall slightly due to weaker demand in China. Greater availability of meat in China, specifically pig meat, is expected to reduce demand for Australian mutton.

Favourable seasonal conditions in the eastern states are expected to encourage graziers to continue rebuilding their flocks, rather than send their lambs and sheep to slaughter. Australian supply of lamb and mutton is therefore expected to remain subdued over 2021–22.

Global sheep meat demand to shift to Middle East

Australia’s sheep meat exports are expected to recover from 428 kt in 2020–21 to 453 kt in 2021–22. This is due to stronger demand in the United States and the Middle East, which is offsetting weaker demand in China.

In 2020-21, exports to the United States rose, while exports to China and the Middle East fell (Figure 2). In total, exports declined in 2020‑21 due to weak global demand during the COVID-19 pandemic, alongside tight Australian supply resulting from the domestic sheep flock rebuild. Exports to China are expected to remain subdued due to the anticipated recovery in China’s pig meat production and the consequent availability of meat in the country.

Figure 2 Volume of Australian sheep meat exports, by country, 2011–12 to 2020–21
Australia’s exports to the United States rose, while exports to China and the Middle East fell between 2019–20 and 2020–21.
s ABARES estimate.
Sources: ABARES; ABS

Middle Eastern demand for sheep meat, especially lamb, is forecast to recover in 2021–22. Falling oil prices have previously weighed on the economic activity of the Middle East. Weak economic activity in the Middle East contributed to a 31% fall in Australian exports of sheep meat to the region in 2020-21. Global oil prices recovered to pre-pandemic levels in the March 2021 quarter. Middle Eastern oil-exporting countries are therefore expected to experience rapid economic recoveries in 2021–22. Sheep meat demand is expected to rise in the region as a result.

Live sheep exports to rise

In 2020-21, live sheep exports fell by 45% to 602,000 head. In 2021-22, live sheep exports are forecast to rise by 10% to 662,000 head.

The fall in live sheep exports in 2020–21 was partly due to tight supply in Western Australia. Western Australia exports most of Australia’s live sheep, but many sheep were sent to the eastern states to support the flock rebuild in 2020. This meant fewer sheep were available for live export from Western Australia in 2020-21.

Weak demand in the Middle East caused by the COVID-19 pandemic also contributed to the fall in live sheep exports in 2020–21. Australian live sheep exports are especially concentrated towards oil-exporting countries in the Middle East, such as Kuwait, Qatar, Jordan, and the United Arab Emirates. In 2019–20, 90% of Australian live sheep exports were sent to these countries.

Substantial year-on-year declines in export numbers during months outside the prohibition on live sheep exports to the northern hemisphere suggest the prohibition had little effect on the decline in exports in 2020–21.

Australian live sheep exports are forecast to rise in 2021–22, as economic growth rebounds in Middle Eastern countries.

Australian flock rebuild to continue

The Australian sheep flock is forecast to grow to 68.2 million head by the end of 2021–22 (Figure 3).

Strong pasture growth in New South Wales is expected to encourage graziers in the state to rebuild their flocks. The August 2021 survey by Meat & Livestock Australia and Australian Wool Innovation suggested that New South Wales had the highest proportion of graziers who were looking to rebuild their flocks. Flock rebuilding in Western Australia is expected to be slower than in the eastern states following the transport of sheep to the eastern states in 2020.

Figure 3 Australian sheep flock size, 2012–13 to 2021–22
The size of the Australian sheep flock is forecast to grow from 63.5 million head in 2019–20 to 68.2 million head in 2021–22.

The sheep flock size declined consistently between 2016-17 and 2019-20.
s ABARES estimate.f ABARES forecast.
Sources: ABARES; Australian Bureau of Statistics

Production to rise for first time in 5 years

Sheep meat production is expected to rise by 8% to 680 kt. This is expected to be driven by increased slaughter and heavier slaughter weights, as favourable production conditions allow graziers to better feed their flock (Figure 4). In 2021–22 lamb slaughter is forecast to rise by 3% to 20.8 million head, while sheep slaughter is forecast to rise by 13% to 5.7 million head.

Lamb slaughter numbers remained steady in 2020–21. In the same year, sheep slaughter numbers fell. This is because graziers preferred to hold on to their sheep for flock rebuilding, rather than send them to slaughter. Some of the lambs born during the first stage of the flock rebuild are expected to grow into adult sheep, leading to more adult sheep being available for slaughter in 2021–22. For this reason, sheep slaughter is expected to increase alongside lamb slaughter in 2021–22.

Figure 4 Lamb slaughter, sheep slaughter and sheep meat production, 2012–13 to 2021–22
Sheep meat production is forecast to rise in 2021–22 from a low level in 2020–21. This increase in production is supported by an increase in lamb and sheep slaughter in 2021–22.
s ABARES estimate. f ABARES forecast.
Sources: ABARES; Australian Bureau of Statistics

Opportunities and challenges

Australia–UK Free Trade Agreement offers opportunity for market diversification

The proposed Australia–UK Free Trade Agreement (FTA) would gradually increase tariff-rate quota volumes on sheep meat over 10 years.

The UK has been a relatively modest market for fresh and chilled sheep meat (Figure 5). Prices paid by UK importers have been on par with or below other high-value markets like the United States and the Middle East.

However, the FTA will provide farmers with an opportunity to make gains in the UK market and further support a diversification in exports. Learn more about the Australia–United Kingdom Free Trade Agreement.

Figure 5 Share of Australia’s fresh or chilled sheep meat export volume, by market, 2012–2013 to 2020–2021
The United Kingdom’s share of Australia’s fresh or chilled sheep meat exports was consistently below 6% from 2011–12 to 2020–21.

In 2020–21, the United States was the largest export market for Australian fresh or chilled sheep meat, followed by Qatar, the United Arab Emirates, Japan, and Canada.
s ABARES estimate
Sources: Australian Bureau of Statistics

Change to domestic sheep and lamb indicator prices

ABARES uses a range of market information to help forecast the gross value of Australian sheep meat production and exports. This includes forecasting Australian livestock prices.

Starting with Agricultural commodities: September quarter 2021, ABARES will produce and publish forecasts for the 2 major national sheep and lamb classes – Meat & Livestock Australia’s National Mutton Indicator and National Trade Lamb Indicator. Historical data are sourced from Meat & Livestock Australia’s national livestock reporting service. The indicators will be used to communicate changes in market prices. They will also be the primary indicators used to estimate the gross unit value of sheep and lamb production.

Previously, ABARES used a weighted average saleyard price (WASP) for this purpose. This method applied state-based production weighting to the different livestock classes, adding complexity and reducing transparency.

The current price indicators are very similar to the previous price indicators. There is therefore no impact on the price forecast, and no break in the series.

The use of industry-standard price forecasts for sheep and lamb classes has several advantages:

  • It is simpler than the WASP, making it easier for audiences to understand.
  • It does not rely on production data, so can be estimated ‘live’ rather relying on quarterly production numbers to be released by the Australian Bureau of Statistics.
  • It provides more information to audiences than the WASP forecast because it is more representative of national prices received by buyers and sellers.

Download

Document Pages File size
Agricultural commodities: September quarter 2021 - Report PDF 77 6.2 MB
Agricultural commodities: September quarter 2021 - Outlook tables - data tables XLS 12 152 KB
Agricultural commodities: September quarter 2021 - Statistical tables - data tables XLS 33 578 KB

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Last reviewed: 14 September 2021
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