‘Remarkable’ rise in price and production

Rural Bank reports spike in sheep prices


Sheep
Crawford Dowling auctioneer Paul Constable nominates the bid during the Ballarat ewe sale

Crawford Dowling auctioneer Paul Constable nominates the bid during the Ballarat ewe sale

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The National Trade Lamb Indicator (NTLI) averaged 639c/kg for the first half of the year.

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FOR the fourth consecutive year, the National Trade Lamb Indicator (NTLI) has continued to climb, averaging 639 cents per kilogram for the first half of the year.

This increase is 14 per cent higher than the same period last year, according to Rural Bank’s 2017 Australian Sheep Annual Review, which was released yesterday at Sheepvention, Hamilton, Victoria.

The spotlight has been on mutton prices with the national indicator averaging 38pc higher than 2016, as producers held onto their breeding stock and capitalised on strong wool prices.

Rural Bank agribusiness general manager Andrew Smith said the Australian sheep industry was in rude health.

The new report, launched by specialist insights team Ag Answers, stated it was “remarkable” to have both prices and production increasing for this period, signalling demand had grown at a rate faster than supply.

“Given domestic lamb consumption has remained relatively steady since the mid-1990s, its clear export markets have underpinned the sector’s growth,” Mr Smith said.

The quantity of lamb exported has increased for the last six years and was 62pc higher in 2016 than 2010.

Mr Smith said the declining production in New Zealand – the largest exporter of lamb to China – had resulted in export volumes increasing 39pc compared to 2016.

“When this is combined with continued growth in Australian lamb’s most valuable export market, the USA, long term demand and prices are set to continue their upward trajectory,” he said.

Slaughter rates trended lower than 2016 as conditions allowed producers to retain stock and increase the size of depleted flocks following a period of drought.

Impressive production

Australian lamb slaughter nudged 23 million in 2016, marking the fifth consecutive year of increased slaughter rates.

The slight rise was triggered by poor seasonal conditions leading to liquidating flocks and increasing prices encouraged growth in lamb supplies.

Lamb slaughter for the year to May was 3.6pc lower than 2016 due to lower marking rates and the increase in stock retention.

A 31pc spike in lamb slaughtered compared in May, compared to April, was reported, as dry conditions forced some turnoff of stock.

Lower slaughter rates was consistent across all states, with the largest year-on-year drop occurring in Queensland which was down -76pc, followed by Tasmania -34pc, South Australia -10pc, Western Australia -9pc, NSW -7pc and Victoria -1pc.

Annual sheep slaughter was under 7m, 14pc below 2016, as producers move to retain breeding ewes.

Since 2000, when there were 50m more sheep, sheep slaughter has fallen 57pc and lamb slaughter risen 24pc to now be 230pc higher than sheep slaughter.

Softened demand

While domestic consumption has plateaued at just under 220,000 tonnes per year since 1990, the quantity of lamb exported for six consecutive years and was 62pc higher in 2016 than 2010.

Growing demand and a depreciating Australian dollar have driven four consecutive years of growth in the value of lamb exports.

While volumes to the US were down 19pc year-on-year, a 26pc increase in the unit price to $11,906/t has meant a 2.6pc lift in value.

Meanwhile China, which accounted for 24pc of Australia’s lamb exports by volume in 2017, by value it only accounts for 13pc due to a low unit price of only $4,059/t.

Domestic consumption of mutton is low, equivalent to 5pc of production. It has predominately been an export product with consumption declining in Australia.

Mutton exports have declined in the last two years and are trending 10.3pc lower in 2017 as supplies have tightened.

Price on point

The AgAnswers analysis reported on the impressive lamb prices given the growth in production over the same time period.

Lamb prices trended upwards in the first half of 2017 as slaughter rates trended lower and producers focused on increasing flock sizes.

The NTLI has averaged 639c/kg cwt, compared to 544c/kg cwt for this time last year – 29pc above the five year average price.

An increase in stock turnoff in June and July subdued prices, which resulted in a drop of 21pc for light lambs, and a 14pc and 12 pc respective fall for trade and heavy weight lambs.

Meanwhile it national mutton prices spiked 43pc on 2016 prices, with 457c/kg cwt average in the first half of 2017.

The main driver of exceptional prices is the tight supply with producers retaining breeding stock.

The report said strong prices on offer for wool are also encouraging producers to hold onto stock.

Let it rain

Seasonal conditions could provide a dampener to the buoyant conditions with the forecast for a drier winter and early spring.

The Bureau of Meteorology’s Normalised Difference Vegetation Index (NDVI) showed higher than normal autumn pasture density and greenness for eastern parts of Victoria, New South Wales and Queensland. However, the bureau is forecasting drier and warmer conditions for much of the parched areas of Western Australia and for south eastern states.

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