Aussie sheepmeat prices have tumbled
Low demand for lamb and sheepmeat in the foodservice sector has significantly impacted the prices in Australia, according to a recent report from Meat and Livestock Australia (MLA). A holistic assessment points to the impact of COVID-19 on foodservice demand for Australian sheepmeat as the main drag on domestic lamb prices, at a time when prices would ordinarily be reaching their seasonal peak.
The three largest export regions for Australian sheepmeat in 2019 were the United States (US), China and the Middle East (MENA), accounting for 69% of total exports. Australia produces a small portion of the world’s sheepmeat supply but accounts for approximately 38% of exports and is the largest supplier to the global market. A full-scale return to pre-COVID-19 foodservice demand is unlikely in the short-term for high-end foodservice outlets. These outlets are usually a key channel for Australian sheepmeat due to its status as the leading supplier of prime lamb into global markets. Subsequently, the flow of Australian sheepmeat into key markets has fluctuated slightly relative to previous years. Currently, cold stores in the US for lamb are up 16% compared to last year, which makes it a difficult market for exporters. Also, low demand in the Middle East is impacting the sector. At the same time, China is increasing demand for animal protein but is expected to grow the volumes of pork and beef imports, a situation that is expected to dampen average sheepmeat export prices.
The availability of lambs for slaughter in the domestic market should only increase from this point onwards, as the number of new season lambs should gradually climb until October/November. On the back of improved seasonal conditions, reported survival rates are higher compared to year-ago levels, which will lend support from a flock rebuild perspective. However, the influx of new season lambs is showing at a time of sustained global demand uncertainty, and domestic prices have started to reflect the seasonal decline much earlier than the previous two years.
The National Trade Lamb Indicator on Tuesday 11 August was reported at 696¢/kg carcase weight (cwt), down 159¢/kg compared to last year. However, the indicator remains 63¢ above the five-year average, despite a sharp decline since 1 June.
The National Heavy Lamb Indicator on Tuesday 11 August was reported at 631¢/kg carcase weight cwt, down 254¢/kg compared to last year. The indicator has now moved in line with the five-year average at 637¢/kg cwt. Heavy export lambs have seen the largest decline of all categories as processors have to increasingly sort lighter specifications.
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