International demand for Aussie lamb soars as butchers deal with domestic meat shortage

New data released by Meat & Livestock Australia on Tuesday revealed lamb and mutton prices had surged to record highs as low local supply was met with "robust" overseas demand.

The report also mentioned sheep producers were managing heavily depleted flocks and heightened feed costs as severe drought continues in the eastern states.

Veteran Ballarat butcher and prime lamb producer John Harbour, who will celebrate his 50^th year in butchery in 2020, said the cost to buy and on-sell lamb was the highest it had been in five decades.

"The impact of the drought in a major lamb supply area in New South Wales and also the Victorian numbers used to produce breeding stock will have a big impact for the next few seasons," Mr Harbour said.

"There's a lot of export demand at the moment but the domestic demand is as strong as it's ever been and even though domestic supply has eased off in some areas, our lamb sales have maintained at normal levels.

"There's been a steady increase on lamb over the last 10 years and more so over the last five but in the last two seasons they have been at the highest rates we have seen."

Meat & Livestock Australia's September Sheep Industry Projections highlighted demand for Australian sheepmeat, from China and the United States in particular, had grown on the previous year and was supported by the depreciating Australian dollar.

Mr Harbour, a former chair of the Ballarat Agricultural & Pastoral Society's sheep committee, said the associated costs including freight and slaughter were also contributing to a rise in retail costs.

"We're after that quality lamb in the 22-to-26-kilo range and there's not going to be as many of those available this year," he said.

"It costs us over $10 a kilo to land a lamb onto our rail here and they're costs which we've never had to work with before and if lamb happens to go up another 50 cents or a dollar in the market, well that will be add another $2 onto what it'll cost us by the time it comes into the shop."

Lamb exports have jumped to $1.6 billion this year, up 16 per cent on this time last year, according to MLA, while mutton export increased 17 per cent to $602 million.

"We've developed very good alliances over a period of time which helps us to sustain good supply of lamb in times where there's tight supply," Mr Harbour said.

"We get lamb direct from various producers and sometimes off the rail and some of the own we produce ourselves and mostly it's coming out of the central Victorian region but we have noticed a shortage in recent times."

In Gippsland, independent butcher Brett Chanter, Yinnar, south of Morwell, said increased export demand was hurting the hip-pockets of local shops like his.

"Personally I think we should only be exporting what is excess to our needs," he said.

"You can't begrudge a farmer if you're getting offered $300 a head locally or $1000 overseas, you'd take it.

"But it's making it really tough because you have supermarkets who are selling crap for cheap and we try and sell good quality stuff but struggle to compete."

Mr Chanter, who has been in the industry for 25 years and owns Webster's Butchers, said the cost to sell lamb had more than doubled in the last two years.

"The price of lamb through the door for us costs about $11 a kilo which is up from about $5.50 a kilo 12 months ago and that's for the carcase we pay to get it through the door," he said.

"We'd make probably 10 to 15 per cent profit once it's sold to our customers so there's not a lot of margin in lamb at the moment.

"You need 25 to 30 per cent to stay in business to cover your overheads so you've just really got to try and survive - between the cost of power, the cost of meat it's a challenge."

MLA senior market analyst Adam Cheetham said domestic sheep and lamb demand from overseas markets had outweighed domestic availability and more than offset the price pressure usually associated with a prolonged dry period.

"For large parts of the east coast, water shortages have reached a critical point," he said.

"Producers in many regions face an increasingly difficult and expensive burden in sourcing water for livestock, with many opting not to join their ewes on hand or further destock"

MLA's projections report indicated lamb production would decline by three per cent in 2019 to 495,000 tonnes of carcase weight, but will be partially offset by increasing carcase weights.

"Lamb production is expected to steadily recover over the next few years to 531,000 tonnes cwt in 2022, based on a long-term trend in lamb productivity gains and the ... return to average seasonal conditions," the report read.

"Average sheep carcase weights continue to reflect the impact of the prolonged drought, with many entering processors with low condition scores.

"Sheep carcase weights are forecast to remain stable on last year at 23.7kg, but back on the five-year average."

The data also showed the US was Australia's most valuable export partner, accounting for 28 per cent of the total export value for the year-to-July while China had 19 per cent of the share.

In 2018, exports contributed 67 per cent of Australian lamb production.