Lamb exports ease, but mutton posts a strong end to 2019

The end of one year and beginning of the next is always a tumultuous time for markets, with holidays and ending financial years for some of our customers requiring a careful balancing of stocks. The December release of the Department of Agriculture’s trade statistics shows that while lamb export consignments eased for a second consecutive month, mutton volumes finished the year in a robust fashion.

After an abnormally strong Spring for lamb export flows from Australia, monthly volumes fell 11% from October to December. This brought the flows more in line with last year’s levels (Figure 1).  Despite this easing, average monthly flows for the quarter were still 13% higher than the five year average. A clear sign that the offshore market remains strong for lamb.

 

China continued to strip supply away from some of our other key export destinations like the US and the Middle East. However, we did see some of our smaller markets such as Europe (up 14%) and the UK (up 18%) taking on more of our lamb in quarter four of 2019 than the same period in 2018. This reflects a good diverse offshore market, thanks to the attractiveness of our quality product and solid promotional efforts by Meat & Livestock Australia.

 

Mutton exports continued to run at their own new pace in response to the strong overseas demand. Unlike lamb flows, mutton export volumes rose from November to December (Figure 2). The 6% lift pushed the total volumes for the quarter 22% higher than the five year average.

 

A leading part of the surging demand for mutton in quarter four was China. Mutton export volumes to China in quarter four were remarkably 122% higher than the five year average for the period (Figure 3). The prevailing protein hole in China as a consequence of the African Swine Fever (ASF) outbreak has certainly given the mutton market a welcome lift. However, a recent Wall Street Journal article suggested  “China is finally getting a handle on African swine fever” so can we expect export market demand to soften into the coming season?

What does it mean?

While December did see China’s rising food price inflation slow for the first time in 10 months, reports suggest that this softening may have been driven by a large release of frozen pork from reserves by the Chinese government. There is a long road ahead yet before any real recovery from ASF.  

 

A significant restructure of their pork sector will be required. Namely, a move away from smaller holdings (less than 1,000 head of pigs) to more western style commercial farms with higher head numbers and a strong focus on biosecurity. This will take time. Regardless of the progress made towards controlling and rebuilding the sector so far, we think strong demand for red meat protein into 2020 will persist, particularly ahead of Chinese New Year celebrations.  

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Key Points

  • Lamb export flows moved lower again in December, but remain 12% higher than the five year average for October-December.
  • Mutton export flows continued rising, up 19% on the five year average for October-December.
  • Chinese demand led the surge in mutton exports, with flows to China from October- December 122% higher than in 2018.

Click on graph to expand

Click on graph to expand

Click on graph to expand

Data sources: DAWE, Mecardo

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