Growing ovine capacity driving shifting markets

Flock of young lambs and sheep in paddock in NSW

Lamb markets closed 2024 with a bang and opened 2025 with a whimper. The rally in December had the usual hallmarks of a supply squeeze, while hot and dry weather over the break has seen supply restored. For sheep, we might be seeing the opposite in terms of supply.

Regular readers will remember us bemoaning the lack of ovine slaughter capacity for much of 2023, as the Covid and drought hangover afflicted processors.  The capacity issue has well and truly abated, with November and December seeing east coast slaughter numbers again break through 600,000 head and stay there.

Figure 1 puts ovine slaughter in some perspective.  The heavy slaughter rates of autumn have been eclipsed, and the last eight weeks of 2024 beat 2023 by 6%.  The five-year average ovine slaughter is a little misleading, as it includes the flock rebuild year, but even the strongest years prior to 2020 only come in at 550,000 head per week.  The recent peak in the week ending the 22nd November was just over 630,000 head, which is 14.5% stronger.

Figures 2 and 3 break slaughter down into lambs and sheep, and this gives an insight into what appears to be happening early in 2025.  Lamb slaughter was lower than the autumn, and similar to last year in the peak months of November and December.  Given the sheep intentions survey data suggests there were more lambs marked last year, it would be somewhat concerning to lamb producers to see they haven’t been processed yet.

It was sheep slaughter that pushed total ovine slaughter to record highs.  Sheep slaughter hasn’t been over 200,000 head since 2007, when the flock was 85 million head and in rapid decline.  Sheep slaughter in November and December was up 20% on 2023.  For 2024, Meat and Livestock Australia (MLA) weekly numbers have east coast sheep slaughter 24% higher than 2023.

Last week we saw lamb prices take a fall, and sheep prices rise.  This is unusual as the two will generally move in the same direction.  With mutton being at a larger than normal discount to lamb, this gap was always going to close at some stage.  The export market for mutton for the last quarter of 2024 was extremely strong, so demand for cheaper protein appears strong. 

What does it mean?

It looks like producers prioritized growing lambs on the last of the spring feed, and sold sheep in November and December, which saw a supply squeeze on lamb. With feed and water supplies running low in key lamb-producing areas, lambs have been turned off in earnest in the first week of January, while sheep supplies have eased.

While not at the extreme December highs, lamb prices are still strong, and the increased slaughter capacity should ensure they remain better than last year. On mutton, it would be a surprise to see prices creep towards the 500c mark, as it’s still more discounted to lamb than historical averages.

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Key Points

  • Ovine slaughter capacity reached record highs in late 2024, driven by sheep slaughter.
  • It seems producers offloaded sheep from November to December and held lambs for sale in January.
  • With strong demand, lamb and sheep markets should find support in the short to medium term.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: MLA, Mecardo

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