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Thursday, May 10, 2018

Robust exports for sheepmeat a positive sign.

By Angus Brown  |  Source: MLA, DAFF, Mecardo

Key points

  • Lamb and Mutton exports were down on March, but much stronger than April 2017.
  • The fact that more sheepmeat is being exported at historically strong prices is positive for the market.
  • The variety of sheepmeat export markets suggests competition will be strong if supply tighten in the winter.

2018-05-10 Sheep Fig 1

2018-05-10 Sheep Fig 2

2018-05-10 Sheep Fig 3

It’s a pretty good sign for a market when production is running strong, yet prices remain at very good levels. Such is the case with lamb and mutton so far this year. Exports of lamb and mutton were down on last month, but much stronger than this time last year, suggesting overseas consumers are happy to take plenty of product at current prices.

Despite lamb and mutton markets being weaker than last year, and off the highs seen back in late December and early January, they are still relatively strong.  The April decile tables show most lamb and mutton indicators sitting in the 80-90% range for the 14 year period. 

There has really only been a couple of short period when prices have been above 600¢ for lamb, and 450¢ for mutton, but they are fresh in the memory.

With prices relatively strong, it would suggest a dampening of export demand, but it seems not.  Figure 1 shows lamb exports posting a 32% increase on April 2017, and a small decrease on March.  The month on month decline was due to a shorter working month, but lamb exports have never been higher in April. 

All major markets took more lamb than last year in April, which is a positive sign as it shows a range of buyers comfortable with current values.

For mutton the story was similar but some markets seem to have stronger demand.  Mutton exports were down 21% on last month as supply tightened, but up 31% on last April.  The mature market in the Middle East received the same amount of mutton as April last year, but the growing, or more volatile markets in Asia took 84% more.  This was driven by China, where exports grew 94% on last year, but interestingly enough, were still below the five year average.

Markets like Malayasia, Taiwan and Singapore are all competing for mutton, with the rising trend in volumes shown in figure 3.  The competition from these markets, along with China has seen Middle East exports stagnate, and the mutton prices start to really respond to shifting demand from Asia.

What does this mean?

Economic models tell us that a period of pro-longed strong prices and strong supply eventually has a negative impact on price. The situation with lamb & mutton is that the outlook is positive, despite the extended good price and solid supply. This strange economic situation can be identified as a broadening of the market base (new customers), and a growing appetite for the product. This means a positive outlook for sheep meat; providing confidence producers can use to build strategy and flocks.

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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