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Thursday, December 08, 2016

Industry projections signal lower slaughter, production and exports

By Matt Dalgleish  |  Source: MLA, NLRS, ACA

Key points

  • The December release of the MLA Sheep Industry Projections shows a tighter season for lamb and sheep than originally expected in the mid-year update from July 2016.
  • Lamb slaughter is anticipated to be 22 million head in 2017, down 2% from the July estimate, and sheep slaughter has been revised 7% lower for next year at 7 million head.
  • Lower slaughter and production is expected to flow through to reduced export volumes in 2017 with the lamb export forecast down 8% from previous projections to 220,000 tonnes swt and mutton exports down 1% to 125,000 tonnes swt. 

2016-12-8 Lamb Fig 1

2016-12-8 Lamb Fig 2

2016-12-8 Lamb Fig 3

2016-12-8 Lamb Fig 4

The release of the results of the October Sheep industry survey by Meat and Livestock Australia (MLA) this week signals a tighter season anticipated into 2017 with further downward revisions noted in slaughter, production and exports for both lamb and mutton from the mid-year estimates.

Figure 1 highlights the revisions to lamb slaughter from the July to December releases with a 2% downward revision noted for the 2017 season to see annual lamb slaughter expected to bottom out at 22 million head on the back of a lower marking rates and a reduction in ewes joined. Lamb slaughter expected to begin to increase beyond 2018, albeit at a slower rate than previously anticipated, to see 23 million head of lamb processed by the end of the decade – a 4% average reduction from the July estimates across the 2018-2020 period.

A similar picture painted for mutton, with larger downward revisions noted in percentage terms from the July estimates, as outlined in figure 2. A reduction in the ewe flock and resultant lower mutton slaughter figures expected for 2017 has seen the December estimate revised down by 7% to see 7 million head of sheep processed next year. Mutton slaughter projections for the period 2018 – 2020 reduced by 9% on average across the three years from the July estimates to see an expectation of 8 million head of mutton slaughtered by the end of the decade.

The lower slaughter of lamb expected to flow through to reduced production and less product available to export as domestic consumption is anticipated to remain fairly stable. The 2017 season is now expected to see 220,000 tonnes swt of lamb exported, an adjustment of 8% below the July estimates. However, lamb exports really taking the heat beyond 2018 with sharp revisions downward from the July estimates noted. MLA projections for lamb exports reduced by an average of 15% over the 2018-2020 period to reach 235,000 tonnes swt by the end of the decade.

Mutton exports revised down only slightly for 2017 with a 1% alteration from the previous projection to see 125,000 tonnes swt anticipated. The period from 2018 to 2020 expected to see an average 4% adjustment lower across the three-year period from the July projections to see 143,000 tonnes swt of mutton exported by 2020.


Link to July Sheep Market Webinar

What does this mean?

The anticipated tighter supply into 2017, combined with stable domestic demand and a relatively robust export sector will bode well for prices into next year for sheep and lamb. Based off the July MLA estimates Mecardo forecast an average annual Eastern States Trade Lamb Indicator (ESTLI) at the 590¢ region and the average annual National Mutton Indicator (NMI) at 365¢ as part of our sheep market webinar held in conjunction with MLA – see above link to the sheep webinar recording held earlier this year.

The December revisions will result in upward adjustments to the Mecardo forecasts for the ESTLI and NMI for the 2017 season and beyond. Stay tuned for the analysis next week where we will release our updated price projections.

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 


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