BUOYED market conditions for Australia’s lamb and mutton prices and export demand are forecast to remain strong this financial year.
Rural Bank and Rural Finance’s July 2016 Australian Sheep and Wool Update report a promising year ahead with weather conditions, a climbing Eastern States Trade Lamb Indicator (ESTLI) and an ever-increasing appetite for Australian lamb in the United States and the Middle East.
The national sheep flock contracted to 70.9 million head in 2015, according to the banks’ specialist insights Ag Answers team, which resulted in a 2.4pc decrease in sheep meat production in the last 12 months which spurred the ESTLI to 649 cents per kilogram carcase weight for the first time since February 2011.
National lamb production increased due to slightly higher slaughter rates and gains in carcase weights.
Western Australia was the only state with increased mutton production over the last 12 months and lamb production increased significantly too.
Sheep prices have reacted to recent rainfall, with the ESTLI increasing by 9pc last month.
While the domestic lamb market is stable at 10kg per capita, larger growth opportunities exist in export markets such as the USA which is up 30pc year-to-date, and the Middle East, up 24pc YTD. Lower lamb exports from New Zealand have aided Australian lamb exporters which were 36pc higher year-on-year.
Australian lamb prices are expected to remain strong this year due to increasing export demand and confidence within the industry to rebuild stock numbers after a dry 2015-16 season.
Current trade lamb prices are above the five-year 80th percentile in every state except Western Australia.
China retained its position as Australia’s key market for wool, accounting for about 75pc of wool exported.
Wool prices across Australia traded between 1200 and 1400 c/kg clean for the majority of the year, making it the most consistent 12-month period of the last five years.
The rise in price is partly attributed to a decline in production last financial year.
High turn-off of stock resulted in fewer sheep shorn and dry seasonal conditions contributed to lower fleece weights.
These factors were more evident in Queensland and Tasmania where drought conditions were severe. Declining production was most apparent for medium micron wool.
While conditions varied across the country, Rural Bank and Rural Finance head of sales Simon Dundon said the Australian sheep industry was in a strong position to reap the rewards of a particularly strong export market.
“Favourable market conditions combined with a smaller than usual national flock has meant that farmers are now in a position to command well above average prices for their product,” Mr Dundon said.
“This is thanks mainly to a very stable domestic market and an ever increasing demand internationally for Australian lamb.”
“While Queensland and Tasmanian based wool producers in particular continue to face a number of challenges, sheep producers across the nation can rightly feel very optimistic about the future of their industry.”