Aus Lamb Exports spiking in US, China

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After a shaky start to 2021, where lamb export volumes were initially down 33% in Jan, Aussie lamb exports have rocketed up 20% month-on-month in May, to bring the year to date total volume to recover within 7% of the five-year average, with the main drivers of increased export volume being China and the US.

The month of May has returned some very promising lamb export figures, with total volumes of 26kt, up 20% from April’s 22kt, (figure 1) while in comparison to the five-year average, May exceeded it by 7%.

Export volumes of lamb to the US saw a jump of 19% month on month, (figure 2) which is seasonally unusual for this time of year. The solid increment in volume comes despite US lamb slaughter trending at 20% higher than last year, and 15% higher than the five-year average.

US lamb slaughter appears to have recovered from the COVID-19 related closure of the major Colorado lamb processor, Mountain States Rosen, whose capacity represented 36% of total US lamb slaughter. The industry response has been that slaughter has shifted to Texas, where existing and mothballed plants stepped in to fill the gap in the market.

Despite the recovery in slaughter, US lamb freezer inventories of 11kt swt are down 33% from the five-year average, and not showing a rebuild trend. The strong demand for lamb is emanating from the recovery in the foodservice industry, where, according to Steiner Consulting, distributors have aggressively snapped up stocks, pushing the domestic cutout value in excess of 16% higher since the start of 2021, to $10.80 US /kg, or $14 AUD/kg while, imported aussie lamb products such as legs and shoulders commanding prices 15-23% higher than a year ago.

Growth in export volumes to China grew by 2.5kt to 7.3kt, representing a whopping 53% month-on-month jump, smashing the five-year average for May by 32% (figure 3). This growth comes off the back of total Chinese meat imports reaching an all-time high of 1mmt swt in March; while outbreaks of new strains of African swine Fever (ASF) puts pressure on domestic animal protein production.

In contrast, volumes exported to the Middle East (figure 4) did not follow the trend in Asia and the US, with volumes languishing at 54% below the five-year average with Jordan taking less than 25% of the volumes seen in 2020, and Qatar volumes at around a third of five-year averages. The axing of the Qatar lamb export subsidy, falls in the oil price, and suppression of foodservice activity due to COVID-19 are the key contributors to the decline. Foodservice demand is estimated to account for around 50% of middle eastern consumption of imported Australian lamb. However, with air travel still crippled, and passenger numbers tracking at nearly 70% down from pre-pandemic levels in the UAE alone, recovery in lamb demand from the Middle East may be a long way off.

What does it mean?

Export volumes on the rise is positive for the lamb industry and are supportive of livestock prices in Australia. Increased demand from the US, despite the recovery in production levels there, is a promising development worth monitoring to see whether the effect will be persistent.

A big jump in exports to China, plus significant lamb demand from middle eastern foodservice channels still poised to return to normal levels as far out as next year, are indicative that there might be yet more demand out there to help push the market along strongly into the future.

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Key Points

  • Total monthly Aussie Lamb exports jumped 20% in May
  • Export volumes to China up 53%, and 19% to the US
  • Middle east exports 54% below the five-year average, but recovery on horizon

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Data sources:  DAWE, Mecardo

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