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Monday, July 11, 2016

Lamb fashionable again in China, but mutton dressing as mutton.

By Matt Dalgleish  |  Source: DAWR

Key points

  • The monthly lamb export figures remain robust at 21,049 tonnes swt, which is 21% above the five-year average for June.
  • A resurgent demand for Australian lamb from China provides a boost to export volumes into Asia.
  • Mutton export volumes nears the usual winter seasonal trough and should begin to recover into August.

2016-07-11 Lamb Big In China Fig 1

2016-07-11 Lamb Big In China Fig 2

2016-07-11 Lamb Big In China Fig 3

The release of the Department of Agriculture and Water Resources (DAWR) June export figures points to promising signs for export demand for lamb as a surge in consignments to China keeps total lamb export volumes trending well above seasonal averages.

Figure 1 highlights the 2016 total lamb export volume pattern showing a steady trend over the past three months with the June figure of 21,049 tonnes swt sitting 21% above the five-year average and outside the “normal” seasonal variation range as indicated by the light green band. Given that this range accounts for 70% of the historic variation in lamb export volume data it is reflective of a very robust year given the 2016 pattern has trended above the 70% range for the entire season.

Total lamb export levels were supported by growing Asian demand, particularly from China, to see Asian volumes increase again this month to 7,312 tonnes swt, 30.3% higher than the five-year average level for June and deviating noticeably from the pattern set in 2015 – figure 2.

Reports of reduced lamb inventories in China said to be behind the growth in demand and bucking the normal seasonal drift lower in total Asian export volumes that usually occurs during May-August as local supply tightens. Indeed, the June lamb export volumes to China of 4,498 tonnes swt is the highest monthly figure recorded and represents a 74.6% increase above the five-year average for June.

Lamb exports to the two other main destinations tracking along comfortably with US volumes of 3,886 tonnes swt 17.7% above the five-year average for June and the Middle Eastern consignment of 6,166 tonnes 31.1% over the June average.

In contrast, sheep export volumes continue to broadly mirror the pattern set in 2015 as the trend heads toward the usual seasonal trough in volumes as tighter production limits the export flow. The mutton export volume of 7,570 tonnes swt reported for June sits 11.3% below the five-year average and is the lowest monthly figure recorded since August 2012 – figure 3.

Mutton exports to the Middle East of 2,991 tonnes swt 8% above the five-year average for June, despite Saudi Arabia and the UAE posting volumes below their five-year average levels by 21.5% and 27.6%, respectively. Export volumes of mutton to Asia reported at 3,228 tonnes swt 13.2% below the five-year average dragged lower by Taiwanese and Malaysian figures.

Don’t forget to register for the MLA/Mecardo lamb and sheep webinar to be held on Monday 25th July 2016. Click here to register.

This webinar is free to attend and will focus on what will drive sheep and lamb prices and where the Australian sheep meat market is headed.

What does this mean?

A resurgent Chinese demand is likely to keep overall lamb export volumes reasonably buoyant as we head into July/August, although there is the prospect of tighter winter lamb production limiting export flows. Historically lamb export volumes to the US and Asia bottom out during late winter and the expectation is for US lamb export volume to reach a trough this season near the 3,750-3,950 tonne level.

Total Asian consignments of lamb appear likely to bottom out around the 5,850-6,000 tonne region, boosted by volumes to China. Monthly mutton export volumes should find a base near 7,000 tonnes swt before recovering into spring.

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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