NSW Department of Primary Industries

Sheepmeat

  • arrow-up Output $1,213 million est. Down 11% yoy.
  • The Restocker Saleyard Indicator was again the standout, up 22% on the 5-year average.
  • Tight supply and strong restocker demand offset the global market challenges.
The value of the industry decreased by an estimated 11% to $1,213 million. Sheepmeat producers benefitted from the combined effects of low supply and sustained high prices, particularly for restockers. Sheepmeat exports continued to be impacted by a COVID-induced fall in demand however demand is starting to return in key markets.

Rebate scheme kicks off early for emergency water infrastructure

The NSW Government has started to process previously successful rebate applications as part of the Emergency Water Infrastructure Rebates (EWIR) Round 1 ahead of Round 2 going live on 1 July 2021.

Deputy Premier John Barilaro said the NSW Government’s priority is to process 500 applications from eligible primary producers who missed out last time..

“The EWIR scheme enables eligible primary producers to access a 25 per cent rebate, up to $25,000, on new purchases and installation costs of new water infrastructure such as bores, dams and pipes,” Mr Barilaro said.

“There’s nothing more important than supporting our primary producers to invest in infrastructure that will make them more resilient next time the inevitable drought hits.”

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Field and river from the air

New committee steers footrot management

NSW Department of Primary Industries (DPI) has announced the new steering committee which will provide ongoing oversight and strategic direction to the NSW Footrot Management Program.

Incoming chair of the NSW Footrot Steering Committee (FSC), Derek Schoen, said the aim is to improve the outcomes of footrot management in sheep flocks across the state.

“Committee members have demonstrated a strategic approach to farming, an ability to resolve competing priorities and practical knowledge in dealing with footrot,” Mr Schoen said.

Image: Incoming chair of the NSW Footrot Steering Committee Derek Schoen

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Incoming chair of the NSW Footrot Steering Committee Derek Schoen stands at a farm gate

Production

NSW Sheep and Lamb Slaughter

  • Lambs
  • Sheep
Download data (.XLSX)
Source: MLA (2021)
Despite the improved seasonal conditions, the severity of the drought over the previous few seasons continued to have an impact on both sheep and lamb supply in 2020-21. Sheep producers sought to replenish the drought-depleted NSW flock which sat at just 20.4 million head at the end of June 2020 18 , its lowest level in a century. The reduced offtake resulted in a decrease in total sheepmeat production, down 14% year-on-year to 167 thousand tonnes cwt w 151 and down 2% on the 10-year average.

In-line with flock rebuilding intentions and the rain-driven urgency to utilise available feed, adult sheep slaughter was down 51% year-on-year to 1.2 million head 151 as farmers sought to retain older ewes and purchase replacement breeders. The sheer appetite for replacement stock in the Eastern States was so pronounced, that by the end of 2020 it was estimated that two million breeding ewes had been trucked across the Nullarbor to farms in NSW, Queensland and Victoria, due to less favourable seasonal conditions in the West. 109 Average sheep cwt w were underpinned by the improved seasonal conditions and abundant feed availability, up 2% year-on-year. 151 The decrease in adult sheep slaughter saw mutton production fall 50% year-on-year, down 32% on the 10-year average.

The turnaround in seasonal conditions experienced in early 2020 led to increased marking rates and thus an increase in the number of available lambs into 2021. Lamb slaughter numbers were up 7% year-on-year to just over 5 million head. 151 Lamb cwt w remained steady year-on-year, and, combined with the fall in slaughter, drove a 7% increase in lamb production. 151

Price

Notwithstanding the continuing uncertainty created by the spread of COVID-19 on global sheepmeat markets, the underlying market fundamentals remained solid, with tight supply and strong restocker demand offsetting the global market challenges. All state saleyard sheep and lamb indicators except the restocker lamb indicator, closed slightly higher than 2019-20 closing prices and average prices remained historically high, although lower than the records set in 2019-20. The NSW sheep and lamb market experienced a relatively typical start to the year, with prices dipping in late winter. This is largely attributable to the usual late winter/spring seasonal decline due to winter feed gaps, however the fall was magnified in 2020-21 by COVID-induced processing plant shutdowns in Victoria. Victorian facilities typically process 40% of Australia’s lambs annually 151 and thus any shutdowns have a substantial impact of processing throughput – particularly in the Eastern States.

Prices strengthened again in late 2020 and into early 2021 due to continued demand from restockers for lambs and ewes, as well as the global economic recovery which drove export demand. Mutton prices continued to trade at the top of the range for much of the year, averaging 640 cents per kilogram cwt w , 24% above the five-year average. The indicator initially fell 26% off the high of 742 cents achieved in early June 2020, to a seasonal low of 544 cents in August 2020 but recovered, well-above the 600 cents mark by October 2020, and generally traded between the 600-700 cents range for the rest of the year. 155 Almost all mutton is exported and thus the market is heavily influenced by the global market, however the reduced supply of adult sheep and large-scale restocking efforts, amplified competition between producers and processors, and largely supported domestic demand.

Restocker lamb v Trade lamb

  • Restocker Lamb
  • Trade Lamb
  • Trade Lamb premium/discount to Restocker Lamb
Download data (.XLSX)
Source: MLA (2021)
Lamb prices were also very well supported with both saleyard and processor prices remaining relatively steady. The main driver being the reduced supply rather than increased demand. The NSW Restocker Saleyard Indicator was again the standout, averaging 938 cents per kilogram cwt w , up 3% on the average from the previous record year and up 22% on the 5-year average price. 151 Fierce competition from all buyers signalled confidence in the 2021 finished lamb market and helped push the indicator above 1000 cents a kilogram cwt w several times throughout the year, hitting an annual high of 1,055 cents in late February. The seasonal conditions also resulted in higher turnoff weight, which saw the NSW Heavy Lamb Saleyard Indicator average price ease slightly to average 769 cents per kilogram cwt w however remaining up on the 5-year average of 720 cents. 151
In terms of differential, whilst the restocker lamb indicator did not quite reach the record price levels seen in 2019-20, the average price spread between NSW restocker and trade lambs in 2020-21 was the largest in over a decade and provided a clear gauge of ongoing market confidence. Restocker lambs traded at an average premium over trade lambs of 137 cents per kilogram cwt w compared to the average for the previous 2019-20 year of 56 cents. The NSW export price for lamb in 2020-21 fell 9%, however remained above the 5-year average. 128

Trade

Contribution to total export value 2020-21

  • Bone-in frozen cuts of mutton
  • Boneless frozen mutton
  • Frozen carcasses
  • Bone-in fresh or chilled cuts of mutton
  • Fresh or chilled carcases
  • Boneless fresh or chilled mutton
Download data (.XLSX)
Source: GTA (2021)

Contribution to total export value 2020-21

  • Bone-in frozen cuts of lamb
  • Boneless frozen lamb
  • Frozen carcasses
  • Boneless fresh or chilled lamb
  • Bone-in fresh or chilled cuts of lamb
  • Fresh or chilled carcases
Download data (.XLSX)
Source: GTA (2021)
NSW sheepmeat exports remained resilient in the face of challenges related to the COVID-19 outbreak and limited domestic supply. It was fortunate that supply was so constrained, as this provided an important offset to the global market impact. Both the value and volume of NSW sheepmeat exports remained relatively stable, with the fall in mutton exports largely offset by the gains in lamb exports. The value of total sheepmeat exports fell by 4% year-on-year to $1.05 billion and the total volume increased slightly by 0.5% to 122 thousand tonnes. 128

The high domestic livestock prices and resilient demand from international markets continued to support trade values. 158 China remained the largest and most valuable export market for NSW sheepmeat, increasing its market share by volume to 59%. 128 The United States was the second largest market. South Korea was the standout growth market despite being small in terms of total market share (7% by value and 5% by volume in 2020-21). Boosted by the Korea-Australia Free Trade Agreement (KAFTA), which entered into force in December 2014, export volumes to South Korea grew (albeit from a low base) by 38% and 49% by value year-on-year. 128

NSW mutton exports trailed the pace set in 2019-20 due to the limited exportable surplus. Total annual mutton export volumes fell 16% year-on-year to 50 million tonnes, just below the 5-year average of 51 million tonnes. 128 Export demand for mutton continued to be relatively strong from China as a result of reduced pork supplies from a second wave of African Swine Fever, and lower global economic growth which pushed consumers towards cheaper cuts of meat. 34

NSW lamb exports for 2020-21 reached 73 thousand tonnes, up 16% year-on-year. The value of lamb exports increased 6% to $683 million. 128 The Australian export price for lamb in 2020-21 was 28% above the five-year average. 158 Lamb contributed to a much larger proportion of total sheepmeat exports in 2020-21, reflecting the constrained mutton supply.

Macroeconomic Conditions

COVID-19 continued to affect red meat supply chains and economies throughout 2020-21. The biggest impact was the fall in foodservice demand both domestically and internationally, due to restrictions and social distancing laws. MLA noted that the impact on lamb demand was larger than that for any other meat, mainly due to lamb’s high price and exposure to premium red meat markets. 156 Retail sales rose, compensating somewhat for the decline in foodservice demand however, there was an overall decline in expenditure on sheepmeat and ovine carcase value. 156

The impact of the ongoing COVID-19 outbreak on global prices was largely countered by the breaking of the drought. The sustained high prices for adult sheep and lambs did bring into question the competitiveness of Australian sheepmeat on a global scale. The global FAO Export Ovine Price Index indicates that sheepmeat rose significantly over the past 5-years 104 mainly due to global demand outstripping global supply. Despite this, Australian sheep and lamb is still relatively cheap in Australian Dollar terms when compared to other global prices. The one exception is New Zealand where a clear disconnect emerged in 2020 due to the increase in Australian prices due to restocker demand. This could translate to a loss of market share if this situation persists into the long-term. 149

Flock of sheep up close

Outlook

Sheep on road
The wet outlook for the 2021-22 summer will keep feed levels high and encourage further restocking. MLA’s recent national flock size projections forecast a rapid return to 76 million head in 2023, the largest national flock since 2008. 156 The pace of this rebuild has been well beyond industry expectations, largely driven by lower adult sheep slaughter, as farmers retain breeders.

The mid-term industry market outlook looks favourable. Prices have begun to ease slightly and will continue to decline as supply reaches its usual spring/early summer seasonal peak however, saleyard prices continue to be at near or record levels and are expected to remain elevated well into 2022, supported by continuing domestic demand from restockers and feeders, and strengthening export demand”.

www.dpi.nsw.gov.au