Outlook for Sheep Meat

The gross value of production for sheep meat (includes lamb, mutton and live sheep) is forecast to fall to $3.9 billion in 2023–24, down by 14% from an estimated $4.6 billion in 2022–23 (Figure 1.1). The forecast fall in production values is driven by lower saleyard prices more than offsetting higher production.

The average saleyard prices of both lamb and sheep are forecast to fall as drier seasonal conditions increase the supply to saleyards. Drier seasonal conditions and a larger sheep flock are expected to increase turn-off, slaughter rates and sheep meat production.

The gross value of production for sheep meat in 2023–24 is $0.4 billion lower than in the June Agricultural Commodities Report. A downwards adjustment to average saleyard prices for sheep meat – reflecting recent price data – has more than offset a small upwards revision to sheep meat production.

The value of sheep meat exports is forecast to fall to $3.8 billion in 2023–24, down by 16% from an estimated $4.5 billion in 2022–23 (Figure 1.1). Export values are expected to fall as lower export prices outweigh higher export volumes:

• The value of lamb exports is expected to fall to $2.7 billion in 2023–24, down by 16% from an estimated $3.2 billion in 2022–23.
• The value of mutton exports is forecast to decrease to $1.1 billion in 2023–24, down 14% from an estimated $1.3 billion in 2022–23.

Export prices are expected to decrease in 2023–24 as higher global sheep meat supply more than offsets an increase in global demand. Rising global sheep meat supply is driven by higher production from Australia – the world’s largest sheep meat exporter. Global demand is expected to rise slightly as falling demand from the United States – the world’s largest importer by value – is more than offset by higher demand from China and the Middle East.

Figure 1.1 Annual value of sheep meat production and exports

Average saleyard prices for both lambs and sheep are forecast to fall in 2023–24 as drier seasonal conditions result in lower restocking demand and increased turn-off rates (Figure 1.2).

Expected El Niño like conditions and a positive Indian Ocean Dipole (IOD) event in late 2023 will generate drier seasonal conditions across Australia (see Seasonal Conditions for more context). Drier conditions are expected to reduce pasture availability, constraining flock growth and restocker demand. As such, the supply of sheep and lambs in saleyards is expected to increase, driving down prices:

• Lamb saleyard prices are forecast to fall to 590 cents per kilogram in 2023–24 (down by 19% from 730 cents per kilogram in 2022–23). Saleyard prices for restocker lambs are expected to fall as drier seasonal conditions slow the increase in flock size. A large supply of lambs is also expected due to several years of robust flock growth and strong lambing rates.
• Sheep saleyard prices are forecast to fall to 355 cents per kilogram in 2023–24 (down by 15% from 415 cents per kilogram in 2022–23). The supply of sheep available for slaughter is expected to increase following several years of flock growth. Drier conditions in 2023–24 will incentivise farmers to cull older stock (including older retained breeding ewes), non-performing ewes, and cast-for-age sheep. Sheep saleyard prices are expected to fall by less than lamb saleyard prices because of higher growth in demand from processors and exporters for mutton than lamb.

Figure 1.2 Average annual lamb and sheep saleyard prices*

Figure 1.3 Annual lamb and sheep production volumes

Sheep meat production volumes (captures lamb and sheep) are expected to increase by 6% to 823 kilotonnes (carcase weight) in 2023–24. The increase is largely driven by higher mutton production as increased slaughter rates more than offset lower carcase weights (Figure 1.3):

• Mutton production is expected to increase to 243 kilotonnes in 2023–24 (up by 10% from 221 kilotonnes in 2022–23) reflecting a high supply of sheep following several years of flock growth. Higher slaughter volumes are offset by slightly lower slaughter weights.
  • Sheep slaughter volumes are expected to increase by 10% to approximately 9.5 million head in 2023–24. Processors are likely to allocate more kill space to mutton due to lower labour requirements and strong Chinese demand for mutton. Hence, mutton slaughter is expected to increase at a faster rate than lamb slaughter.
• Lamb production is expected to increase to a record 579 kilotonnes in 2023–24 (up by 4% from 557 kilotonnes in 2022–23) due to high slaughter volumes. Drier seasonal conditions are expected to reduce pasture availability and encourage higher turn-off rates year-on-year.
  • Lamb slaughter volumes are expected to increase by 4% to approximately 24 million head in 2023–24. A strong lamb season is expected in spring 2023 due to the large flock, high numbers of breeding ewes, high marking rates and lambing rates. However, lamb turn-off is expected to be somewhat constrained as processors prioritise mutton slaughter and US demand for lamb remains subdued. Therefore, lambs are expected to be promoted to sheep at a higher rate year-on-year despite drier seasonal conditions.

The sheep flock is expected to increase to 71.6 million head in 2023–24 (up by 1% from 71.1 million head in 2022–23) as the high proportion of breeding ewes and high lambing rates outweigh higher slaughter rates. Relatively high pasture availability and retained soil moisture at the start of the year are expected to support good joining conditions and lambing rates in 2023–24.

Carcase weights for lamb and sheep are expected to fall in 2023–24 but remain relatively high. Drier conditions are expected to lower feed availability throughout the year, slightly hindering the ability of lambs and sheep to gain weight. Additionally, a higher proportion of female lambs, ewes and merinos are expected to be slaughtered which lowers overall carcase weights. Carcase weights have followed an increasing trend since around 2012–13 due to a shift in flock composition towards meat breeds (see Box 1.3 in the June Agricultural Commodities Report) and improvements in genetics.

Sheep meat export volumes are expected to increase to 528 kilotonnes in 2023–24 (up by 5% from 502 kilotonnes in 2022-23) reflecting the increase in sheep meat production.

Live sheep export volumes are expected to fall by 10% to 620,000 head in 2023–24 (Figure 1.4) due to the declining Western Australian flock size constraining the availability of sheep for live export. Live sheep export volumes have trended down over the past 20 years reflecting the long-term decline in the Western Australian sheep flock. Almost all Australian live sheep exports are from Western Australia.

1.4 Annual live sheep exports, value and volume

Global sheep meat supply is expected to rise in 2023–24 driven by higher Australian production outweighing lower New Zealand production. Increased supply of Australian sheep meat is expected to drive down global export prices:

• Australian production and exports of sheep meat in 2023–24 are expected to rise, placing downward pressure on global prices. Australia is the world's largest exporter of sheep meat, exporting around 48% of global sheep meat exports in 2021–22.
• By contrast, New Zealand production is expected to fall in 2023–24 driven by a long-term decline in the NZ sheep flock. Lower lambing rates, fewer breeding ewes and structural shifts in local land use to forestry and carbon farming are also driving down production. New Zealand is the world’s second largest sheep meat exporter.

Global demand for sheep meat is expected to rise in 2023–24 driven by higher demand from China, the Middle East and the Republic of Korea outweighing lower demand from the United States. Falling global sheep meat prices are expected to increase both global sheep meat demand and consumption, particularly in price-sensitive markets. However, this will only partially offset the impact of higher global sheep meat supply.

• China’s demand for sheep meat is expected to increase year-on-year in 2023–24 as consumer spending improves following the removal of pandemic restrictions in December 2022. Since then, Australia's mutton export volumes to China have increased significantly (Figure 1.5). Other factors are also expected to support this historic rise in exports:
  • Chinese consumers appear to be becoming more price sensitive, reflecting challenging economic conditions. Falling global prices for lamb and mutton have likely incentivised higher demand from China.
  • African Swine Fever continues to constrain pork production in China. This is expected to incentivise Chinese consumers to continue consuming mutton as a protein substitute.
• Demand for sheep meat in the Middle East is expected to increase as the region’s post-pandemic recovery supports higher consumption, tourism and population growth. Lamb export volumes to the United Arab Emirates have grown strongly in recent months (Figure 1.6).
• Demand in the Republic of Korea is expected to remain strong. Australia's lamb export volumes to the Republic of Korea were relatively high in 2022–23 despite lower economic growth (Figure 1.5).
• Demand from the United States is expected to be subdued. The United States is Australia’s highest value market for sheep meat, importing predominantly higher value fresh or chilled lamb cuts. Falling real disposable incomes and a subdued economic outlook are likely to lead to weaker consumption in retail and food service channels. As such, consumers are expected to substitute away from lamb – a premium product – trading down towards lower-value cuts of meat.

Figure 1.5 Monthly mutton exports volumes, seasonally adjusted*

Figure 1.6 Monthly lamb exports volumes, seasonally adjusted*

Biosecurity remains a key risk for the livestock industry

Foot-and-mouth disease has been reported in Indonesia and other countries to Australia's north. If introduced to Australia, these diseases would reduce market access for Australia’s exports and be extremely disruptive to Australia's livestock industry. The Australian Government is continuing to work with industry and the Indonesian Government to develop and strengthen prevention and preparedness measures.

Australia-UK Free Trade Agreement entered into force on 31 May 2023

The Australia-UK Free Trade Agreement (A-UKFTA) will remove tariffs from over 99% of Australian goods. Tariff elimination periods vary by product, ranging from immediately upon entry into force to ten years.

This agreement is expected to benefit Australian livestock exporters, providing immediate access to substantial duty-free transitional quotas for sheep meat. Within 10 years, tariffs on all Australian agricultural goods will be completely eliminated.