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Friday, September 27, 2013

Australia’s lamb production to exceed NZ for first time on record

By Augusto Semmelroth  |  Source: Beef + Lamb New Zealand Economic Service, Statistics New Zealand

Key points

  • Poor seasonal conditions in NZ in 2012/13 expected to see lamb production and exports decline in 2013/14.
  • Australia anticipated to produce more lambs (for meat purpose) than NZ for the first time on record.
  • Reduced production levels in both Australia and NZ likely to support lamb prices in 2013/14. 

2013-09-26 Australia ’s Lamb Production To Exceed NZ FIG 1

2013-09-26 Australia ’s Lamb Production To Exceed NZ FIG 2

2013-09-26 Australia ’s Lamb Production To Exceed NZ FIG 3

Reduced marking rates and a smaller lamb crop in New Zealand for 2013/14: that’s the forecast by Beef + Lamb New Zealand. Lower conception rates arising from poor seasonal conditions and below average pasture availability will ultimately impact the lamb production and export capacity of our major competitor in lamb export markets.

Between 2006 and 2012, the New Zealand adult sheep flock fell 9 million head, or 23%, to 31.2 million head. During the same period, breeding ewe numbers fell a similar 25% to 20.4 million head while the lamb crop dropped 22% to 26.5 million head by 2012/13 (figure 1).

After a lift in flock size in 2010/11 and 2011/12, the return of dry conditions in the 2012/13 season saw sheep slaughter jump 14% year-on-year to 4.2 million head. That led Beef + Lamb New Zealand (MLA’s equivalent in New Zealand) to cut flock number estimates by 1% to 30.9 million head for 2013/14. In addition, breeding ewe numbers are also expected to drop 1% year-on-year to 20.2 million head in 2013/14, the lowest level since the 1940’s.

The impact of less favourable seasonal conditions was not restricted to downsizing of the flock size and number of breeding ewes. Lower feed supplies saw ewes mated in poorer conditions, resulting in a pronounced drop in conception rates. Beef + Lamb New Zealand estimate conception rates at a 9-year low of 121% for 2012/13, and well below 2011/12’s 130% (figure 3).

Beef + Lamb New Zealand has forecast its 2013/14 lamb crop down 2 million head to 24.4 million head (figure 2). This is 7.7% down year-on year, and 19.5% below the 10-year average of 30.4 million head. Considering that 75% to 80% of the lamb crop is slaughtered each year in New Zealand, lamb slaughter in 2013/14 should be somewhere between 18.3 and 19.5 million head, or 6-12% lower year-on-year.

Based on these assumptions, New Zealand will slaughter less lambs than Australia for the first time since slaughter statistics started being reported. Estimates for Australian lamb slaughter in 2013/14 are varying from to 19.6 million (ABARES) to 20.6 million head (MLA). Taking a mid-point for New Zealand’s estimates of 18.9 million and Australia’s of 20.1 million head, Australia is likely to slaughter 6% more lamb than New Zealand in 2013/14.   

What does this mean?

After a stark shift from less intensive sheep/lamb production systems to dairy farming, New Zealand’s lamb production is at one of the lowest levels in decades. Lower production means export capacity will also fall in 2013/14.

With both New Zealand and Australia, the two major lamb exporters, expected to see a 5-10% fall in production in 2013/14, global lamb prices are likely to find strong support in the next 12 months. That becomes even more evident as export demand from Asia, the Middle East and the US is expected to remain robust during the period.

Tighter domestic supplies coupled with a lower A$ and reduced competition from New Zealand will more than likely see saleyard prices higher in 2013/14.  

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