Meat stockpiles are mounting in overseas cold stores, consumer spending is shrinking, farm destocking rates are surging and it's been an unseasonal winter of record abattoir throughput volumes.
After years of heady prices, the stampeding sheepmeat market has galloped into a quagmire of complications in 2023.
Last week the Eastern States Trade Lamb Indicator saleyard price slipped to a 10-year low of 464.5 cents a kilogram (carcase weight), or an average $110 a head.
Two years ago it was at an all time peak, just over 1000c, and was still bouncing well above its five-year 800c average in August and September last year.
Saleyard prices for grown sheep have flopped even further, down from averaging 600c/kg to 250c in the past 12 months, after a 700c high in late 2021.
Early August paddock sales of scanned in lamb Merino ewes fetched half their $181/head average of 12 months ago on online marketplace, AuctionsPlus, with top prices of $120/head down from $250 in 2022.
Crossbred lambs were 44 per cent cheaper, ranging from $40 to $90 compared with $98 to $150 a year ago.
Eastern states sheepmeat values are now almost matching those in the west, where fears of the forecast shutdown of the live export trade have gnawed into farm confidence levels for 18 months and fuelled destocking strategies - which at times have included sending sheep east.
"I doubt anybody would have thought lamb prices touching $350/head (gross) were sustainable 20 months ago, but the dramatic correction has been a bit hard to swallow," said Victorian livestock auctioneer with Nutrien Ag Solutions, Nick Byrne, in Bendigo.
"Three good seasons and a lot of restocking activity pushed the eastern market to record levels, but it's a hugely different story now.
"We probably haven't seen the market back at these price points for 10 or 15 years.
"New season lambs were worth about $8/kg a year ago, today there's still quite a lot of delayed 2022 season drop to sell, and new lambs are now coming in, maybe to sell for mid-$5."
Myriad of factors
Agents, market analysts and processors point to "a myriad of factors" contributing to flagging prices which, in turn, have spurred nervous producers to offload more stock for fear of being caught with even lower prices in spring.
For starters, last year's wet and cool spring and summer in south eastern Australia stalled growth rates, delaying many lambs hitting saleyards for several months.
Ironically, that late influx was compounded by forecasts of a looming dry El Nino weather pattern which prompted NSW and Queensland sheep producers to start culling stock as grazing options deteriorated.
Lackluster wool market prospects, soaring shearing costs and the forecast of next year's national flock numbers hitting a 15-year high of 78.5 million have added weight to many Merino producers' decisions to scale back on both sides of the continent.
Analysis by Mecardo showed abattoir slaughter rates for mutton and lamb up 34pc and 15pc respectively over the year to August 11, to almost 522,000.
Eastern processors actually absorbed about 460,000 WA sheep and lambs (at $30-plus/head freight) during 2022-23, with South Australia's Thomas Foods International notably active from April to July.
Interestingly however, SA trade lamb markets were not noticeably impacted according to Meat and Livestock Australia data, with July prices averaging $144/head, and even a bit higher in May, compared with $120/head in WA.
Meanwhile, overseas consumer demand for our sheepmeat, which was worth $4.5 billion in 2021-22, did slow late last year, particularly in China and the premium US market.
It has been erratic ever since.
As difficult global economic conditions lingered, exporters have struggled to lock into clear price and demand signals from offshore buyers and subsequently have been reluctant to make forward order commitments to producers back at home.
While this year's much improved availability of shipping container freight at far cheaper rates has helped exporters' costs, it also triggered a rise in shipments from Australia and New Zealand, some of which remain uneaten.
Mr Fear's running the sheep industry at the moment
- Roger fletcher, Fletcher International Exports
"Economic conditions worldwide seem to be making processors tentative about committing to (forward) prices, which is contributing to a lack of sheep market confidence," observed AuctionsPlus network general manager, Paul Holm.
"The late finish to the lamb supply season hasn't been good for confidence either, especially when producers in certain areas really need to sell sheep because seasonal conditions are already getting tight."
The scramble to sell and volatility overseas had left "Mr Fear running the sheep industry at the moment", according to big NSW and WA processor, Roger Fletcher, at Fletcher International Exports.
"The season's not too bad in many places - it's very good in some parts - but people have hit panic stations," he said.
"They're worried if they don't sell this week the price will be lower next week," he said.
Cold storage costs
Exporters were taking a hit from global uncertainty and the past year's leaping interest rates added to margin pressures, "especially if you have $20 million in product sitting in cold stores while you hold out for a better sale price".
"Warehouses everywhere are filling up with all sorts of stuff that people aren't buying at the moment - not just meat," Mr Fletcher said.
"Northern hemisphere summers are always a difficult time to sell lamb, and the hotter weather they've had this year doesn't help.
"However, it won't last for long ... and having cheaper meat to sell gives us a chance to get in and build markets.
"Remember, 40 years ago 85pc of Australian lamb sold domestically, now it's mostly exported."
Sheepmeat exports have continued growing, too, now helped by cheaper supplies.
Exports up, and down
Despite global economic nervousness and erratic buying trends, July's monthly sheepmeat exports totalled 40,500 tonnes, up 21pc on the same month last year.
Rabobank analyst, Edward McGeoch, said, however, while the Middle East was steadily recovering from a smaller base, big export consumers China, Malaysia and the US lost ground in the past six months, although they were generally still ahead of year-ago trendlines.
Softer US demand was concerning given America represented about 25pc of our export trade and was a high value market, but after falling 40pc in the year to April, US volumes rebounded recently.
"With global demand generally softer than in the past couple of years it will be harder to get our export figures to move much more than they have, so that will unfortunately continue to impact livestock prices," Mr McGeoch said.
High slaughter numbers at processing plants would, however, keep plenty of volume available for export.