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Thursday, September 15, 2016

Recovery in lamb and sheep exports

By Matt Dalgleish  |  Source: DAWR

Key points

  • Lamb exports rebounded off the seasonal lows during July to see a 14.5% increase on the month to 16,001 tonnes swt recorded in August
  • Export volume for mutton bounced off the seasonal trough more aggressively than lamb lifting 47.2% from the lows recorded in July to see 7,825 tonnes swt reported during August
  • Heading into spring it is not uncommon to see a surge in sheep and lamb exports by 40% as increased supply and lower domestic prices encourage a lift in export demand

2016-09-15 LAMB FIG 1

2016-09-15 LAMB FIG 2

2016-09-15 LAMB FIG 3

The Department of Agriculture and Water Resources release of the August sheep and lamb export volumes show a recovery from the traditional winter seasonal lows registered last month and points to an increase in trade volumes into spring as the supply of lamb and mutton expands.

Figure 1 demonstrates the seasonal trend in total monthly lamb export figures for 2016 which shows a 14.5% increase in consignments from July to August to see 16,001 tonnes of lamb exported this month, just short of the five-year average for August by 2.2%. Shipments of lamb to the US, UAE and Papua New Guinea during August coming in higher than their respective five-year monthly average for August in each destination lifting the overall monthly volumes off the seasonal lows for the year.

A similar increase off the yearly lows reported for sheep export volumes too (figure 2) with a 47.2% lift from July to August to see 7,825 tonnes swt recorded. Although sheep export figures not strong enough to get within close proximity of the five-year average trend for August, falling short by 13.8%, underpinned by relatively softer trade to the Middle East (11% below the five-year average for August), Asia (13.4% under the five-year average) and “other countries” (34% below the five-year average for this time of year).

As identified in our recent mutton/lamb price spread analysis the wet season has enable mutton prices during August to hold up relatively firmer when compared to lamb and a potential reason for why the monthly mutton export volumes are trending further below the five-year average pattern when compared to the trend in lamb export volumes.

Despite export volumes for both lamb and sheep trending below the five-year average pattern it is not unusual to see trade decline during winter as seasonal supply conditions and higher winter prices take its toll on the export sector. However, some positive signs are on the horizon particularly when assessing the combined lamb and sheep seasonal export volume patterns – figure 3.

Traditionally, August through to October experiences a surge in export volumes for lamb and sheep as the seasonal spring flush of ovine supply weighs on domestic prices and flows though into a more competitive export product. As the five-year average trend for lamb and sheep export volumes demonstrates it is not uncommon to see a 40% lift in combined consignments during spring, peaking during October at around 35,000 tonnes swt. Indeed, as the combined lamb and mutton average seasonal pattern demonstrates the usual trend during the first half of the year tends to be range bound movement in export volumes between 25,000-30,000 tonnes before a pronounced lift toward the yearly peak coinciding with the spring flush.

What does this mean?

Wet season may continue to keep prices for mutton relatively supported when compared to lamb. A potential impact of relatively more expensive mutton could flow through to somewhat softer mutton export volumes into the second half of the season.

If mutton prices continue to hold up into spring we may see monthly mutton export volumes continue to trend further below the long term average seasonal pattern than lamb.

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