Exporters have yet to see signs that overseas markets are prepared to pay more for lamb.
Continued market weakness in China and another record lamb production year from Australia continue to dampen global prices, dashing hopes of an immediate boost to sheep farming fortunes.
AgriHQ is forecasting some improvement in winter pricing, but senior analyst Mel Croad said “the degree of upside at this point is not startling, given we are starting from such a low point”.
Meat companies are cutting costs, looking for efficiencies and reducing their reliance on China.
Meat and Livestock Australia (MLA) is forecasting yet another year of record lamb production this year before easing slightly.
Croad described this season as unusual.
Since January the lamb schedule has stayed within a tight band while the 626,000 lambs killed in the lead-up to Easter marked just the second time this year and third time in three years that a weekly kill has exceeded 600,000 head.
The kill to the end of March was 6.5% or 691,000 lambs ahead of the same time last season, indicating potentially tighter winter supplies.
“These tight supplies may not be enough to fully offset the weaker market fundamentals and the continued surge of production out of Australia,” Croad said.
She said store lamb prices are weak relative to schedule prices, with confidence yet to build among winter lamb finishers following a tough trading season last year.
Alliance Group sales director James McWilliam said the company is
reducing exposure to China by diverting sheepmeat and beef to higher paying markets.
“We have also made significant progress in diversifying our products that continue to be sold into the Chinese market, taking us further up the value chain in China.”
McWilliam said prices have improved in North America, the United Kingdom, continental Europe and wider Asia, but China sets global sheepmeat prices and will determine the pace of recovery.
He attributed the lack of schedule movement to small price increases in North America and Europe while China pricing remained flat.
Alliance initiatives such as artificial intelligence technology to measure intramuscular fat levels in lamb and marbling percentages in beef will assist farmers with breeding and feeding programmes and returns.
He said Alliance is also aligning processing capacity with stock flows and improving operational efficiency.
Silver Fern Farms (SFF) chief supply officer Jarrod Stewart said while New Zealand lamb attracts premium prices over the Australian product, that price differential means customers facing depressed consumer confidence and high inventory levels have the choice of lower priced meat.
“While we’ve got some big levers working against us right now, we’re confident that this is a point in time that will pass.”
Stewart said SFF has reduced costs but continued to invest in its customers, markets and processing infrastructure to increase product profile, efficiency and reliability.
“We can’t save ourselves to prosperity and we can’t sit in a forlorn hope that our story will somehow resonate with customers if we aren’t prepared to invest in telling that story.”
Stewart is confident about SFF’s strategy and that it has the right platform for when prospects improve.
AFFCO chief executive Nigel Stevens said the company is modifying production specifications and channelling lamb to higher paying markets, meaning a significant increase in volumes going to the UK, Europe, Middle East and North America.
“The reality is that we currently face price ceilings in many markets,” he said.
Stevens said slim processor margins mean there is limited scope to increase the lamb schedule during the season despite excess processing capacity ensuring intense procurement competition.
MLA is forecasting a 2.9% drop in Australian sheep numbers this year to 76.5 million, which follows three successive years of growth and two years of record lamb slaughter.
A record 621,000t of lamb is expected to be sold this year into both export and domestic markets, which comes after Australia produced a record 599,461t in 2023, 11.6% higher than 2022, which was in itself a record year.
MLA’s market information manager, Stephen Bignell, said if this year’s production is achieved, it will be 21.3% or 109,359t above the 10-year average.
Lamb production in 2025 is forecast to ease to 587,000t and then rise to 606,000t in 2026 due to improved carcase weights.
