Australian sheep and lamb industry projections 2009

January 2008 Kara Jones

2010 sheep and lamb industry projections

18th February 2010Kara Tighe – Sheepmeat Analyst

Sheepmeat industry developments in 2009

On-farm•

Lamb sale prices up 13%-26% & 40% for sheep in 2009

•

Lamb production up 4%, mutton down 16%

•

Sheep flock down 7% in 2009 & 26% in 3 years

•

Prime lamb profitability increasing & attractive relative to most other enterprises in mixed farming areas

•

Drought receding in many areas

•

Growing evidence of desire to halt flock liquidation & rebuild in some areas

Off-farm

•

Lamb exports up 9% (value up 17%), mutton back 15% (value back 1%), live exports down 15% (value up 1%)

•

Domestic lamb consumption up 1%, expenditure up 10%

Prospects for 2010…

•

Rate of the Australian flock decline to slow to 2% in 2009-10 •

Requires a further 15% fall in sheep turnoff in 2010

•

Limited sheep supply to reduce mutton supply, exports and live sheep exports

•

Lamb production to increase 2%–

Higher lamb slaughter due to favourable

season & shift to prime lambs –

Retention of more ewe lambs to prevent larger increase in lamb supply•

Small rise in both domestic lamb consumption and lamb exports

•

Saleyard

prices to exceed 2009 averages

A poor southern wet season last year (April – November 2009)

Good falls during February…especially in NSW, but needs to be followed up with an Autumn break

For now, the season looks favourable

Drought & shift to cropping sees further sharp falls in sheep flocks in 2008-09

WA VIC NSW SA TAS QLD

0

0.5

-0.5

-1

-1.5

-2

-2.5

net change million head (June 2009 compared to June 2008)

-5%, to 25 million head

+4%, to 4.1 million head

+1%, to 10 million head

-5%, to 2 million head

-12%, to 14.8 million head-12%, to 15.5

million head

Slower rate of flock decline expected in 2010

Source: ABS, MLA forecasts

90 92 94 96 98 00 02 04 06 08 10f 12f 14f

31 March until 1999, 30 June from 2000

0

50

100

150

200million head

f = forecast

Another sharp decline expected in sheep turn- off

Source: ABS, MLA forecasts

90 92 94 96 98 00 02 04 06 08 10f 12f 14f0

5

10

15

20

25million head

slaughter live exports

f = forecast

By extension, mutton exports to fall

Source: DAFF, MLA forecasts93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f

0

50

100

150

200

250'000 tonnes swt

Africa North America Middle East Asia other

f = forecast

Source: NLRS

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec50

100

150

200

250

300

350A¢/kg cwt

2010 2009 2008 2004-08 average

National average sheep saleyard prices

January 2010 national mutton prices averaged 315 ¢/kg cwt

↑72% on January 2009

↑104% on 5-year average (2004-2008)

Lamb industry outlook for 2010

Shift from wool to lamb production

92-93 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09e150

200

250

300

350

400

450'000 tonnes cwt lamb

200

300

400

500

600'000 tonnes cln wool

lamb production wool production

Source: ABS, AWEX

98-99 00-01 02-03 04-05 06-07 08-09 10-11f 12-13f0

10

20

30

40

50

60million head

breeding ewes lamb slaughter

Source: ABS, MLA forecasts

Slow growth expected in lambs as ewe flock stabilises

↑2%/year

↑1%/year

Lamb slaughter

Breeding ewe flock

Shift to prime lambs sees increased ewe proportion of the flock & increased lamb turnoff rate

Source: ABS, MLA forecasts

94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09 10-11f 12-13f 14-15f20

30

40

50

60

70%

breeding ewes as a % of flock lamb slaughter as a % of breeding ewes

Lamb production to increase 2% in 2010

Source: ABS, MLA forecasts

90 92 94 96 98 00 02 04 06 08 10f 12f 14f0

100

200

300

400

500

600'000 tonnes cwt

15

17

19

21

23

25kg/head

production carcase weight

f = forecast

Lamb demand in 2010

Surge in both domestic (10%) & export value (20%) for lamb in 2009

Source: ABS, DAFF, MLA estimates

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09e0

500

1000

1500

2000

2500domestic A$ million

0

200

400

600

800

1000

1200export A$ million FOB

domestic expenditure export value

Local consumption for lamb to continue upward trend in 2010 and beyond

Source: ABS, ABARE, MLA forecasts

92 94 96 98 00 02 04 06 08 10f 12f 14f0

50

100

150

200

250

300'000 tonnes cwt

0

300

600

900

1200

1500A¢/kg retail weight

consumption retail price

f = forecast

Australian lamb exports to grow 2% in 2010

Source: DAFF volumes, ABS values, MLA forecasts

90 92 94 96 98 00 02 04 06 08 10f 12f 14f0

50

100

150

200exports '000 tonnes swt

0

10

20

30

40

50% of production

exports % production

f = forecast

NZ lamb exports to recover 3.4% in 2009-10

01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10fSeptember year

200

250

300

350'000 tonnes swt

Source: Meat & Wool NZ

Lamb exports to the US - up 2%, to 39,000 tonnes swt

Source: DAFF volumes, ABS values, MLA forecasts

92 94 96 98 00 02 04 06 08 10f0

10

20

30

40

50'000 tonnes swt

0

50

100

150

200

250

300

350A$ million

volume value

f = forecast

Lamb exports to the Middle East - up 8%, to 38,900 tonnes swt

Source: DAFF volumes, ABS values, MLA forecasts94 96 98 00 02 04 06 08 10f

0

10

20

30

40'000 tonnes swt

0

50

100

150

200A$ million

volume value

f = forecast

Lamb exports across other markets in 2010

China/Hong Kong

EU Pacific SouthEast Asia

Canada SouthAfrica

0

5

-5

-10

-15

-20

% change 2010 on 2009

24,900 tonnes swt

14,300 tonnes swt

11,500 tonnes swt

7,200 tonnes swt

5,200 tonnes swt

2,400 tonnes swt

Source: DAFF, MLA forecasts

Lamb prices to maintain momentum

00 01 02 03 04 05 06 07 08 09 10f0

100

200

300

400

500A¢/kg cwt

Source: MLA's NLRS

Slaughter lamb farm incomes to continue improving in 2009-10

Source: ABARE

90-91 92-93 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09financial year

0

50

100

150

200

-50

-100

$'000 (2008-09 dollars)

farm cash income farm business profit

Sheepmeat industry overview

•

Lamb & sheep prices to remain high & move up again over medium term

–

Steady rise in local and overseas demand•

Improvement in farm incomes on higher prices, lower costs & higher turnoff

•

Prime lamb industry keeps expanding - defying recent falls in the sheep flock

•

Flock liquidation to slow this year and end by 2012–

Further 13% fall in sheep turnoff required in 2010 (on track)

Threats:•

Price correction

–

Some risk of customer backlash and a ‘correction’•

Drought continues flock decline & threatens growth in lamb supply