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Bright Outlook for the Sheep Industry in 2017

Australian lamb slaughter is forecast to decline in 2017 on the back of slightly poorer lamb markings and fewer ewes joined, and the result will cascade to lower production and exports.

For 2017, lamb slaughter is projected to be 22 million head, down 2% from the estimated 2016 level. While this is a decline year-on-year, 22 million head is still in line with the long-term growth trend observed over the past decade.

Breaking the annual processing down to a quarterly basis, it is anticipated that the June and September quarters will be when supplies are the tightest. Lamb availability in the March quarter on the other hand, is likely to benefit from carry-over stocks from the final months of 2016, when extremely wet weather delayed many lambs coming to market.

Australian lamb production for 2017 is projected to ease 2% to 492,800 tonnes carcase weight (cwt), and like slaughter, while this is a year-on-year decline, the volume is in the realms of record territory.

Breaking down the demand side of the equation, the Australian domestic market is anticipated to remain the largest consumer and account for 48% of production, or 237,000 tonnes cwt, with many encouraging signs coming from the market. For instance, domestic per capita consumption has stabilised in recent years, while at the same time the weighted average retail price has been increasing. To put this in perspective, domestic lamb retail prices in 2016 averaged just 10¢ shy of the record high set in 2011, at $14.51/kg, and per capita consumption is 8% higher now than what it was then.

On the export front, Australian lamb shipments are anticipated to ease 4% year-on-year in 2017, to 220,000 tonnes shipped weight (swt). While there are strong demand signals from the domestic market, internationally, signals are mixed.

For instance, the lifting of the government subsidy on imported Australian lamb in Bahrain will likely see reduced volumes to the region continue, while at the same time, the UK pound remains low and US cold store volumes of sheepmeat are currently down significantly from year-ago levels.

Similarly, total Chinese sheepmeat imports in 2016 were subdued due to high domestic sheepmeat production in China, however, domestic production levels are anticipated to be lower next year. The earlier than usual Chinese New Year in 2017 has reportedly spurred demand more recently, with importers already beginning to build up stock levels. In-market reports suggest that importers are anticipating good demand for sheepmeat during the upcoming cooler months.

Taking all these elements into account, the Australian sheep and lamb markets are set to benefit from reduced supplies and the apparent resilience from the domestic consumer. Similarly, while there are mixed signals from the major Australian export markets, there are still many willing to procure Australian product and New Zealand (NZ) lamb and mutton exports seem set to fall further.

The result may be a fifth consecutive year of higher year-on-year prices, or if not, at least levels similar to those of 2016.

Source : MLA Sheep Industry Projections 2017

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