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Thursday, May 19, 2016

Mutton export: A mirror image of 2015

By Matt Dalgleish  |  Source: DAWR

Key points

  • The monthly pattern in total mutton exports for February to April 2016 has been mirroring the trend set in 2015. The normal seasonal cycle suggests a dip in export volumes during winter.
  • Increased volumes to the Middle East during April was offset by decreased volumes to countries outside Europe, Asia and the USA.
  • Despite short term fluctuations in export destinations for mutton the medium/long term picture indicates a stable and diverse export sector for Australian sheep product.

2016-05-19 Mutton Exports Fig 1

2016-05-19 Mutton Exports Fig 2

2016-05-19 Mutton Exports Fig 3

The release of sheep export figures for April from the Department of Agriculture and Water Resources (DAWR) shows volumes from February to April have closely mirrored the 2015 seasonal pattern.

Reported April consignment of 12,652 tonnes swt sitting a mere 3.2% above the April 2015 figure, but comfortably above the five-year average for April by 19.5% - figure 1. Normal seasonal fluctuations in mutton exports points to a lull in export volumes over the winter tightening of supply before recovering strongly as the spring flush returns.

A noticeable increase in mutton shipments to the Middle East during April was offset by a decline in volumes to other destinations which meant that there was relatively minor variation in total sheep export levels when compared to the pattern set in 2015. Figure 2 highlights the Middle Eastern April surge to 5,165 tonnes swt, a 29.6% increase on volumes from April 2015 and 28.9% above the five-year average. Bahrain a key driver in the increase in Middle Eastern demand for mutton as quarterly figures here show a switch out of lamb and into sheep, as a cut to trade subsidies for lamb encourages a shift to relatively cheaper mutton.

Figure 3 highlights mutton export volumes after removing the Middle East, Asian, European and US trade which shows there has been a steady decline in shipments since February 2016.  As the green shaded band represents the “normal” variation in this series we can see that the February peak was at the higher end of the “normal” seasonal range and the recent decline is a move back toward more average seasonal levels.

While the 936 tonnes swt reported for April 2016 represents a 34.5% decrease from the five-year April average the monthly averages over the first four months of the year are fairly similar for the 2015 and 2016 season. Indeed, the January to April monthly average for 2016 sits at 1,877 tonnes swt, only 3.8% under the January to April average for 2015. This suggest that while short term fluctuations in sheep export volumes are evident in the current season the market remains reasonably stable across a medium/longer term point of view.

A fall in mutton export volumes during April to Singapore and Taiwan, below their respective five-year average levels, was offset by increased volumes to China and Malaysia, which were above their respective five-year averages. The overall impact of these variations in monthly volumes meant that trade to Asia as a whole for April 2016 was roughly in line with the 2015 season and remains 24.5% above the five-year average for this time of year. 

What does this mean?

Clearly the short term variations in the flow of mutton exports across monthly intervals and between export destinations appears to stabilise when aggregated across regions and viewed across a medium/long term time horizon.

The diverse and broad nature of the export market for Australian sheep product encourages this stability and when combined with a more competitive A$ (thanks to the recent fall from 78 to 72.5¢US) suggests a reasonably stable performance for the sector over the 2016 season.

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