The combination of price and good seasons that have driven expansion in the Australian lamb and sheep industry over the last two years have eased during the first half of 2012, as additional lambs and softer export conditions bring prices back from historically high levels.
Releasing the Meat & Livestock Australia mid-year sheep projections, chief economist Tim McRae said the toned-down outlook for the Australian lamb and sheep industry for 2012-13 should come as no surprise.
“Lamb and sheep prices over the last two years were unprecedented – driven by lower Australian and New Zealand supplies and restocker demand, fuelled by excellent seasons in most areas of Australia,” said Mr McRae.
“After falling to its lowest level in almost 100 years at the tail end of the drought, the Australian sheep flock is now expanding, estimated to have increased 2.6% in 2011-12, to 75 million head,” he said.
Despite the lamb price fall, overall returns for slaughter lamb producers in 2012 and 2013 should continue to be favourable, underpinned by reasonable prices and higher turnoff rates.
Overall Australian lamb exports in 2012 are projected to increase 11.2% to 178,000 tonnes swt, and a further 3% in 2013.
Export values look set to remain stable or decline modestly, as the high A$, subdued global demand and increased competition from New Zealand impacts on returns for Australian exporters.
“The increased competition from New Zealand, due largely to the weakened demand in the EU and high NZ$, has seen more New Zealand product diverted into China and the Middle East competing with Australian product,” said Mr McRae.
The US remains a key destination for Australian lamb, with exports forecast to reach 35,000 tonnes swt in 2012.
However the fastest growth market for the first half of 2012 has been the Middle East, with exports jumping 57% to 22,167 tonnes swt.
The positive conditions for Australian lamb to the Middle East are expected to continue for the remainder of 2012 and 2013, with shipments forecast to reach 47,000 tonnes next year.
While the outlook for the lamb industry remains positive, in the short term there are several hurdles confronting the industry, including the increased competition from New Zealand and sluggish demand in the EU market where consumers are becoming increasingly price conscious.
For the adult sheep market, historically tight slaughter levels and mutton production in 2012 and 2013 should underpin returns, although below those levels seen during the major flock rebuilding in 2010 and 2011.
The forecast for softer restocker demand and a combination of larger breeding ewe flocks and drier seasonal outlook will also impact returns for sheep at the saleyards.
The outlook for the live sheep trade continues to be framed by the roll-out of the Government’s new regulatory requirements, combined with a 60-year low sheep flock in WA.
Exports for 2012 are tipped to reach 2.6 million head, up 6% year-on-year, increasing to 2.8 million head in 2013.
Download the 2012 mid-year lamb and sheep projections update
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