China triggers global lamb price hike as domestic processors struggle with power costs

But the lack of supply is putting pressure on the supply chain, as processor continue to fight for more sustainable energy prices.

The record price paid for lambs has been broken 10 times in the past two months, and currently sits at $344 a head. Prices peaked at the beginning of September when the national trade and heavy lamb indicators reached 871c/kg and 913c/kg respectively.

But Meat & Livestock Australia’s market intelligence manager Scott Tolmie said Australia wasn’t alone in its record run, having compared prices with global competitors New Zealand, United Kingdom and the US.

“They have all hit price records in the past 12 months… China is a huge determinant as the largest importer, producer and consumer of sheepmeat in the world,” he said.

The amount of Australian lamb exported to China nearly doubled year-on-year for the 2017-18 financial year, hitting 52,255 tonnes shipped weight, up from 24,748 tonnes shipped weight in 2016-17. Exchange rate movements have also supported a strong sheapmeat export market, especially to the US.

“The trade lamb indicator, despite hitting new records, when you adjust it to US dollars is still below peaks it hit in 2011 – so it is definitely strong but not out of kilter with global markets,” Mr Tolmie said.

Sheepmeat exports to the US are up 8 per cent year-on-year, but the lack of heavy lamb availability meant lamb exports to the US dropped 16pc in August, while we sent more Australian mutton to them instead.

“For the likes of the US, our exports are being constrained with heavy lambs, but places like the Middle East don’t have an issue with lighter lambs coming onto the market,” Mr Tolmie said.

Australian Meat Industry Council chief executive Patrick Hutchinson said the lack of lamb supply was showing through “price records happening week upon week upon week”.

“You don’t have a choice… have to pay what market is putting up. So minimise other costs so it is sustainable and when prices come back the margins move more in (processors) favour,” he said.

“However we don’t want to just process through high prices, we want to sustain high prices – but it all depends on good structured long-term policy around key areas of labour (migrant or local), energy and regulation.”

Mr Hutchinson said the lack of a national energy policy, rather than the price of lamb, was “becoming unmanageable”.

“For instance ALC in Colac, they are having to invest heavily in alternative operations such as solar to try and reduce energy costs because they only have two companies they can negotiate with in the market,” he said.

Sustainability was an issue with the sheep industry at such a high, he said, with a lack of livestock supply, cost structures and labour shortages meaning many processors were running at 90pc capacity or less.

“When it rains, how our industry will be able to respond and withstand that and come out the other end is difficult to predict while we have uncertainty around certain government policy requirements,” he said.