By Matt Dalgleish | Source: DAWR, ACA
The October release of the Department of Agriculture and Water Resources (DAWR) sheep meat trade volumes shows a strong lift in mutton shipments to Asia, and in particular China. Although it is not uncommon from a historic seasonal perspective to see the volume of mutton consignments increase in the third quarter of the year, the October volumes to China are noteworthy.
Figure 1 highlights the seasonal pattern for mutton exports for 2017, with increased month on month volumes noted since the middle of the year. As the five-year seasonal average trend shows, it is reasonably common to see month on month consignments rise throughout the later part of the season. The 2017 trend has been hugging the upper banding of the 70% range since August, indicative of strong offshore demand and assisted by a more competitive and falling A$ throughout that time frame (see link below to Asian demand fuels mutton and lamb trade).
A breakdown of key regional export zones shows that much of the growth in demand for mutton since the middle of the year has emanated from Europe and Asia, with both of these centres recording well above average monthly volumes since August 2017. In contrast, the Middle Eastern monthly flows over the same period are only slightly above average, while shipments to North America and “other regions” have been in decline since August and recorded October figures that were very much below average.
In relation to the growth in Asian volumes, much of the increased demand since July 2017 has been attributed to China and Malaysia, pushing the 2017 trend to test above the upper level of the 70% range banding in October – figure 2. Interestingly, as foreshadowed in our analysis of sheep meat demand forecasts (see link below), China and Malaysia were two of the key Asian regions scheduled to see significant growth in demand for sheep meat in the coming years.
It probably comes as no great surprise that forecast demand out of Asia will be a key driver to the growth in sheepmeat exports out of Australia, particularly given the well-publicised increase in population and a burgeoning middle class forecast for Asian countries, and China in particular.
That aside, the recent surge in mutton trade volumes to China for October was nothing short of exceptional, as identified by figure 3. Indeed, from a historical perspective the October 2017 mutton volume of 6,622 tonnes swt was the second highest volume recorded for any previous October and the fourth highest monthly total for any month.
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