The overseas demand for Australian lamb rises
While local factors tend to have the strongest impact on prices week-to-week, demand-side factors often drive prices over the longer term, especially when a particular spec becomes associated with a particular market.
This dynamic can be seen when comparing the Heavy Lamb Indicator with United States (US) imported lamb leg prices. The two price indicators are not fully correlated, but are related, and the US price tends to influence the heavy lamb over the long term.
Prices for both US lamb imports and the Heavy Lamb Indicator began to fall in December 2022, and continued sliding throughout most of 2023. The fact that both indicators fell is something of a coincidence; Australian prices eased in response to expectations of dry weather, while weak consumer demand in the US drove import volumes down.
The resurgence of Australian lamb prices in October 2023 preceded the lift in US import prices by approximately three months, as east coast rains boosted market sentiment domestically, while increased prices for other proteins in the US market drove demand from January 2024 onwards.
Since then, the robust demand for lamb in the US has supported heavy lamb prices, and the heavy lamb price began trending away from other indicators. Since the start of the year, the Heavy Lamb Indicator has fallen by 16%, while the Light Lamb Indicator has eased by 34%. While both have eased, the relatively strong performance from heavy lamb is due in part to strong overseas pricing supporting demand, which is less evident in other parts of the market.
Given the relationship between meat demand and livestock price, the strong outlook for Australian red meat in the global market is a positive indicator for producers. As competitor supply continues to decline and as consumer spending in most key markets retains a robust pace, Australia is well placed to meet global demand over the coming months and years.
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