Several factors are hindering WA sheep farmers’ ability to take advantage of surging export demand.
Western Australian sheep producers have been sending truckloads of sheep east as dry conditions in the west have encouraged an exodus.
Meanwhile eastern producers, particularly in NSW, have been eager to rebuild their flock.
This has been putting some downside pressure on WA flock numbers at a time when the longer-term prospects for sheep meat markets are looking promising.
Supply tight
Australia and New Zealand dominate the world trade in sheep meat, with combined export volumes from these two nations contributing to between 65 and 75 per cent of global export volumes in recent decades.
The United Nations Food and Agriculture Organisation (FAO) estimates that, in 2019, Australia and New Zealand sheep meat exports accounted for 71 per cent of the total export volumes.
Historically, New Zealand was the dominant player in the export of sheep meat.
However, the gap between the two nations has narrowed since the growth in the prime lamb industry in Australia and the rise in lamb/mutton export markets as a proportion of the Australian sheep meat production from 1990 through to 2010.
Indeed, in recent years Australia has eclipsed New Zealand to become the world’s largest exporter of sheep meat product, with 36 per cent of the global trade in 2020, according to FAO estimates, compared to 30 per cent for New Zealand.
Furthermore, the FAO anticipates Australia will continue to dominate world sheep meat export supply for the remainder of the decade.
Analysis of the sheep flock of the 10 top sheep meat exporting nations gives a clue to the strong sheep meat prices being achieved in recent years, as the ‘global export flock’ has been in decline since the early 1990s: from 400 million head to just less than 250 million head.
While it’s likely improved production efficiencies in key sheep meat exporting countries such as Australia and NZ have enabled the production of more sheep meat with a lower flock size, there just hasn’t been enough supply to keep up with the demand.
This places Australian sheep producers in an enviable position globally, as our dominant position as the main supplier to the world allows us to benefit directly from the anticipated sheep meat export demand growth.
Demand to grow
Global sheep meat demand is expected to rise over the coming decades, according to FAO estimates, particularly from the developing world. Sheep meat is a product influenced by global economic growth cycles.
Therefore, there are good prospects for increased sheep meat demand as economies begin to recover from the effects of COVID-19.
Adding impetus to the growing demand for sheep meat have been the ongoing issues within China’s pork herd.
The threat of African Swine Fever (ASF) has re-emerged in China in recent weeks, with reports of new variants of the disease delaying the pig herd rebuild.
In an earlier article for Business News, this column outlined why data on the pig herd rebuild in China seemed to be at odds with what the official Chinese government reporting suggested.
Now, with the prospect of a delayed rebuild and further complications from ASF, it seems Chinese consumers are again on the hunt for other meat proteins.
The Department of Agriculture, Water and Environment trade data for February 2021 shows a 170 per cent jump in demand for Australian lamb from January levels, lifting export volumes to 5,622 tonnes (shipped weight).
This is the highest Aussie lamb export level for a February to China on record.
The Chinese boost to sheep meat exports during February wasn’t limited to lamb, with mutton exports also getting a strong upswing.
February 2021 mutton volumes to China lifted 69 per cent over the month to register 6,242t shipped weight.
As was the case with lamb exports to China, this is the strongest mutton export volume to occur during February on record, matching the previous record set in February 2019.
WA perspective
Climatic conditions haven’t helped WA sheep producers this season.
Adding further difficulty to the trading environment have been the recent complexities in navigating the changes to the live sheep export trade, which is such a crucial element of the WA sheep sector.
The net result is that the sheep flock in WA is in a liquidation phase at a time when it should probably be expanding so that sheep producers and the supply chain in WA can benefit fully from the expected growth in the global sheep meat market over the coming decade.
• Matt Dalgleish is manager of commodity market insights at Thomas Elder Markets (TEM)
