Sheep and cattle farmers will be able to breathe a sigh of relief for the next few years, with record lamb and sheep prices set to continue.
Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) indicated lamb prices should increase six per cent during 2016 to 550 cents per kilogram, and keep rising until 2020-21.
These good figures reflect increased demand and a slight undersupply of lambs. Supply is expected to peak in four to five years time, which should see a decrease in prices after that point.
It’s a similar story for sheep prices, which are expected to increasing five per cent to around 350 cent before peaking at 385 cents next year. By 2020-21, this number will be on the decline, expected to settle at about 354 cents.
Abb McAllister of McAllister Saunderson Stubbs says recent hot weather has led to slightly lower prices in the local area.
“Lamb prices have come off the oil a bit over the last three weeks or so, they’re between 520 and 540 cents carcass weight” said Mr McAllister.
“The hot dry weather means the quality isn’t there. In these conditions, more people are choosing to sell, which means more choice and generally lower prices.”
Despite the latest results, Mr McAllister expects things to improve in the near future.
“Yesterday at Wagga with a smaller yarding, the market regained five to ten dollars a head, and skins are also valued at 12 to 13 dollars,” said Mr McAllister.
“Going forward into winter the market should kick up again, and I think we’ll see it reach 550 to 550 cents.”
Older sheep will follow a similar trajectory, says Mr McAllister, with prices predicted to rise in the cooler months.
“It’s pretty much the same story for older sheep, it came off the boil a bit over January and February, more so than with lambs, but it will kick up a bit now.”
Mr McAllister says that much like cattle, sheep farmers are choosing to invest in raising a well-rounded animal that can sell at top price.
“They’re looking at different options now, doing more worm testing and not taking shortcuts,” said Mr McAllister.
“It’s not the price that rules now, it’s using the proper products to get the results.”
The local market mirrors experience at the national level, which has seen a reduction of flock numbers as people choose to take advantage of high prices.
“That’s the experience, people are probably selling them a bit younger, and probably cashing in on the older sheep too,” said Mr McAllister.
“Some people will choose to hold onto them for a bit longer, but naturally a lot of people will grab the good money while it’s about.”
He remains optimistic about the future of the industry moving forward.
“I do think we’ll see a further improvement in future months and we’ll see the good prices holding up for a few years yet.”
ABARES is basing their forecast peak in prices on increased seasonal conditions, which should see lamb and sheep fetching good prices at the saleyards.
They also predict if conditions improve and rainfall occurs as predicted, the national flock should increase as graziers choose to restock. A two per cent increase on the national flock is expected this year, reaching 71.4 million head by the middle of 2017. This number should reach 77 million by 2020-21 as slaughter rates are tipped to decline.
On the sheep meat front, China is set to be hit the hardest by this decline, forecast to decrease a massive 22 per cent this year. This drop is the result of both low production and greater competition from our New Zealand neighbours, who benefit from being able to export sheep meat to China without a tariff.
As it stands, lower production and slaughter rates this year should lead to a seven per cent drop in lamb exports.
Australian lamb should continue to grow in popularity as it is recognised as top-quality meat around the world. In 2014-15, the U.S. was Australia’s most profitable lamb export market, valued at a record $504 million. Australia will build on that success this year, with an expected four per cent increase to 50,000 tonnes which will mean that market will be valued at $540 million.
Exports to the Middle East are expected to drop two per cent this year to 68,000 tonnes due to lower supply, but should experience a surge in the lead-up to 2021, when 73,000 tonnes will be shipped. This market has proved enthusiastic consumers of Australian lamb and will remain an important market moving forward.
Live sheep exports are expected to be hit with a 15 per cent reduction this year to 1.9 million head, as supply weakens and farmers look to replenish their flocks. That number should increase to two million next year as the national flock increases.
China is expected to remain the most significant buyer of Australian wool, accounting for around 77 per cent of wool exports in terms of volume.
ABARES indicates the value of wool exports should increase as supply tightens, but says that low global crude oil prices will certainly impact the rate at which wool is substituted with synthetic fabrics, pushing wool prices lower.