Farmers feeding on high lamb and mutton prices says MLA

Meat & Livestock Australia senior market analyst, Adam Cheetham, said supplementary feeding of slaughter sheep during the drought had become widespread and had boosted carcase weights.

"Producers with lambs on hand but limited feed have increasingly refined their production systems to reflect the difficult conditions, with greater focus on supplementary feeding and lot feeding lambs," Mr Cheetham said.

"Expected lamb carcase weights for 2019 are now projected at 22.9kg, up 2pc year-on-year, while sheep carcase weights are forecast to remain stable on 2018 at 23.7kg."

NAB NAB Agribusiness economist, Phin Ziebell, has also been watching the move to supplementary feeding and has a word of warning.

"The hot trade lamb price is driving growth in containment feeding which may see traditional seasonal factors become less influential over time, however we are nervous around high input costs should prices fall from here," he said.

MLA has updated its sheep industry projections for 2019 amid ongoing challenging seasonal conditions in northern Victoria and most of NSW.

Mr Cheetham said the southern wet season so far had been mixed with parts of South Australia and south west Victoria enjoying an above average season.

Lamb supply from these areas would be pivotal to price movements for the rest of the year.

"The significant variability has presented challenges in ascertaining how national lambing rates have performed, however the overwhelming consensus is for fewer lambs to enter the market for the remainder of 2019," Mr Cheetham said.

Increased numbers of new-season lambs have been flowing into key NSW and Victorian saleyards in recent weeks which has triggered erratic buying and pushed the benchmark Eastern States Trade Lamb Indicator below 800 cents a kilogram carcase weight.

MLA has predicted lamb production will decline by three per cent year-on-year to 495,000 tonnes in 2019 with exports to reach 268,000 tonnes.

Looking ahead, lamb production was expected to steadily recover over the next few years to 531,000 tonnes in 2022, based on a long-term trend in lamb productivity gains and the assumption of a growing flock with a return to average seasonal conditions

Mutton production was tipped to drop by 11pc to 201,000 tonnes this year with exports forecast at 162,000 tonnes.

National lamb slaughter this year was now expected to reach 21.6 million head, a decline of 5pc on 2018 while the annual sheep slaughter forecast remained unchanged at 8.5 million head.

Lamb and mutton prices have been pushed to record levels by hot international demand, particularly from China and the US who are now engaged in a damaging trade war.

Sheepmeat export values broke many new records for the first seven months of the year, reflecting the strength of overseas demand and an Aussie dollar trading near a 10-year low.

Lamb exports reached $1.6 billion in the year to July, 16pc ahead of last year, and mutton exports hit $602 million, 17pc up on last year, MLA said.

The average export unit value also hit new highs with lamb at $A8.90 a kg, up 11pc on this time last year, while mutton lifted by 4pc on last year to $A6.13 a kg.

While the US trailed China in volume, it remained Australia's most valuable lamb market, taking a large portion of leg and loin cuts and representing 28pc of total export value for the year-to-July (China trails in second place with 19pc).

On a volume basis, lamb exports to the US have grown by 4pc so far in 2019.

The average export unit value of lamb to the US underpinned the market's value growth, averaging $A13.08 a kg in the first seven months of 2019, up from $A11.24 a kg a year ago.

However, in US dollars, the unit price has been relatively steady, fluctuating between $US7.50 a kg and $US8.50 kg over the past three years, MLA said.