In Australia, and to a lesser extent in New Zealand, local supply strongly affects price because they provide almost all the Lamb available to export markets. Economics tells us that if we can measure supply and price, we can get a handle on demand, and this week we take a look at demand from a couple of perspectives.
Long-time readers will have seen Figure 1 before. Figure 1 shows the relationship between annual lamb slaughter and the average Eastern States Trade Lamb Indicator (ESTLI) for the year. As lamb slaughter increases, price generally moves lower, and vice versa, until we see a jump in demand.
The jump in demand comes about when we see lamb slaughter increase, yet prices also increase. The most recent jump in demand came in 2024, when more lambs were slaughtered than in 2023; yet prices moved higher.
For the year-to-date number for 2026, we used the average price to date for first-half slaughter, and the average price in 2025 for second-half slaughter to give an estimate of the total. With 2026 sitting on the trendline for 2024 and 2025, it suggests demand levels are similar.
Showing figure 1 at a conference last week, along with some data on rising lamb slaughter weights, a question came up: is the price related to the volume of lamb produced, rather than head slaughtered?
Figure 2 simply replaces lamb slaughter on the x-axis with lamb produced. Looking at production instead of slaughter gives some interesting insights. In 2018, the lower lamb slaughter weight compared to subsequent years moved it back closer to the 2017 level and off the later trend line.
Figure 2 also shows a steepening of the curve for 2024-2026 compared to 2019-2023. This suggests that it takes a smaller decrease in supply to see the same increase in price. While this is good as supply tightens, it also means that increases in supply will see prices fall more quickly.
It makes sense that as prices get higher, the slope of the curve steepens. Higher prices encourage producers to turn off lambs at higher weights, which supports lamb production relative to slaughter numbers.
What does it mean?
This very broad overview suggests slaughter numbers have a stronger relationship with price than lamb production, but the two are closely related. The good news for lamb producers is growing demand. Over the last five years, production has increased by 9%, and prices have increased by 44%. That is extraordinary demand growth.
Key Points
- Lamb demand remains very strong, with the last jump in demand coming in 2024.
- Tight supply has driven strong lamb prices in 2026.
- Demand for lamb meat is stronger, but prices seem to respond more reliably to slaughter.
Click on figure to expand
Click on figure to expand
Data sources: Meat & Livestock Australia, ABS, Nutrien, Mecardo
