WHILE many of Australia’s agricultural producers have been hit by the global economic downturn, sheepmeat producers have defied the trend, experiencing some of their highest ever prices, according to a recently-released report from Rabobank.
Australian sheepmeat producers were sheltered from the downturn by falling flock numbers, both at home and overseas.
Report author and Rabobank senior analyst Wendy Voss says the prices sheepmeat producers are currently seeing are a result of some tough times for the industry over recent decades.
“Flock numbers have been falling in Australia since the early 1990s– when the wool price support scheme was removed," she said.
"In recent years the rate of decline has accelerated, with the flock falling from 100 million head in 2005 to just 71.5m head in mid-2009."
One of the major contributors to this fall in numbers has been drought, which was particularly severe in the spring of 2006 and 2007, driving an increase in total sheep and lamb slaughter and a fall in prices as producers destocked in response to feed and water shortages.
On top of the already significant challenge of drought, sheep farmers faced surging input costs from 2006 with grain, fuel and fertiliser prices rising steeply.
The higher grains prices also saw many producers expand their grains production, often at the expense of sheep numbers, shifting paddocks away from pasture to cropping.
The report says the ongoing reduction in the flock resulted in falling sheep and lamb availability from 2008, supporting higher prices for producers.
The decline in availability continued in 2009, which coincided with rapidly tightening supply in Australia and New Zealand.
“While not the biggest producers of sheepmeat in the world, together Australia and New Zealand provide over 90 per cent of the world’s sheepmeat exports,” Ms Voss said.
"The impact of plummeting flock numbers in both countries has impacted significantly on global trade.
“Adding to the tightening of the demand-supply chain has been the fact that many of Australia’s sheepmeat markets are also facing falling local supply. The US sheep flock has decreased from 20m head in 1970 to less than 6m head at the beginning of 2009.
"In the EU it is a similar story with the production in the major sheepmeat countries falling by almost 20 per cent in the past decade.”
China (the world’s largest producer of sheepmeat) has also faced a number of challenges, which have resulted in production falling by two percent in 2008. Already a net importer of sheep and goat meat, the gap between production and consumption has widened over recent years, providing increased opportunities for Australian sheepmeat sales.
* Full report www.rabobank.com.au
