By Angus Brown | Source: MLA's NLRS. DAFF. ABS
For the first time in three years, Australian lamb exports have been below 18,000 tonnes for two months in a row, while mutton exports have tracked back towards average levels after spending two years at strong levels. Asia in general, and China in particular, have been the declining markets.
Weaker lamb slaughter over the winter has seen lamb exports remain weak in August. Total exports rose slightly on July levels, gaining 2%, but were down 2% on August 2014. Figure 1 shows that lamb exports were relatively weak for the second month in a row, and have seen rolling 12-month average exports start to fall, after rising consistently for three years.
Lower lamb exports appear to be a factor of weakening slaughter, as fewer old season lambs were carried into winter and new season lambs are flowing slowly.
Demand for lamb from Asia appears to have weakened, with exports 23% lower than in August 2014 (figure 2). This fall has largely been driven by China, where exports were down 26.5% year-on-year. Partly offsetting the lower exports to Asia were increases in lamb exports to the Middle East, which were up 21%, and the US, up 4%, on August 2014.
Mutton exports started to trend up in line with seasonal averages in August, rising 8% but still sitting 15% below August 2014 (figure 3). Exports to Asia were 12% higher than July levels, but remain 25% below August 2014. Again, the Middle East and US took up some of the slack, with exports rising 7% and 99% respectively. However, it should be noted that the US only took 11% of mutton exports in August, so in volume the rise was not extraordinary.
It seems the strong domestic sheepmeat supply in China is continuing, leading to weaker demand for Australian sheepmeat. For this reason, exporters are sending more volume to other markets. The weaker demand from China has been offset by weaker sheep and lamb supply, and therefore markets have largely tracked sideways, at historically strong levels, over the last 3-4 months.
Weaker exports are not unusual for this time of year, with the main concern being seemingly weakening demand from China and Asia. Last year, these markets took the largest share of lamb and mutton during the peak supply period of late spring and summer, and supported the market accordingly.
If that demand is not there this year, lamb and mutton prices might weaken more than we are currently forecasting. This is because US and Middle East exports don’t tend to fluctuate as much with supply: they are more steady markets, especially for lamb.
The good news for growers appears to be the trend towards restocking, which has seen the 12-month rolling lamb exports turn down for the first time since the highly-priced 2010-2012 period.
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