EXPORT demand is forecast to soften next year on the back of lower Australian lamb slaughter and mixed global signals.
Meat and Livestock Australia market analyst Ben Thomas said Australian lamb shipments were expected to fall four per cent year-on-year in 2017, to 220,000 tonnes shipped weight (swt).
The Middle East, United States and remained the country’s largest export customers, accounting for 65pc of Australian lamb shipments this year, according to MLA 2017 forecast.
The dramatic 10pc decline in exports to the Middle East was attributed to a 92pc drop in shipments to Bahrain for the year-to-date – from 7419t swt in 2015 to 593 tonnes swt in 2016.
Bahrain government made a politically sensitive move to slash meat subsidies in 2015, resulting in inflated retail prices which is expected to continue to dampen export volumes to the region.
However, Mr Thomas said two of the largest and most progressive markets in the Middle East for Australian lamb – the UAE and Qatar – recorded considerable growth for the January to October period which were up 12pc and 13pc respectively.
Uncertainty surrounding the impact of Brexit on trade to the European Union and United Kingdom are forecast to continue into the new year, as new trade agreements are finalised.
Mr Thomas said negotiations could result in increase of Australia's meagre sheepmeat access to these markets and provide a significant lift to exports and prices.
Meanwhile, Brexit concerns have already made a stamp on trade with the depreciating UK pound relative to the Australian dollar bruising trade with chilled lamb exports down 40pc year-on-year, however frozen volumes increased 28pc.
United States is expect to be a silver lining next year, with low cold storage volumes of sheepmeat expected to stimulate import demand, following an 8pc lift in lamb shipments in 2016.
Frozen lamb exports to China were up 21pc for the year at a low export value of 333 cents a kilogram, while mutton exports to China fell 25pc year-on-year.
In September, China sheepmeat imports plummeted 41pc, which MLA attributed to high domestic production.
As a result of the high slaughter this year, Mr Thomas said domestic production levels were anticipated to be lower next year.
He said the earlier than usual Chinese New Year in January had spurred demand more recently, with importers beginning to build-up stock levels.
The domestic market will hold its position as the largest lamb consumer, accounting for 48pc of production, or 237,000 tonnes cwt next year.
“Taking all these elements into account, the Australian sheep and lamb markets are set to benefit from reduced supplies and the apparent resilience from the domestic consumer,” Mr Thomas said.
“While there are mixed signals from the major Australian export markets, there are still many willing to procure Australian product and New Zealand lamb and mutton exports seem set to fall further.
“The result may be a fifth consecutive year of higher year-on-year prices, or if not, at least levels similar to those of 2016.”