“If Australia can maintain meat processing capacity, producers could benefit from supply disruptions in other red meat exporting countries. This may also help build on Australia's reputation as a reliable source of red meat.”

This was a view expressed by ABARES in their June quarter sheep meat outlook – released just prior to the latest wave of Covid-19 cases and the restrictions that have accompanied them. Then came the production capacity limit on Victorian red meat processors on Friday, and this week’s closure of JBS Brooklyn’s plant ‘indefinitely’.  So, while last week’s slaughter report shows Victoria lamb throughput up 9 per cent year on year, it might be the last time that figure trends above 2019 levels for a while.

Lamb yarding’s are already showing the impact, with throughput well down on last year for the past three weeks – more than 113,000 head down. Last week Victoria yarded nearly 20,000 less lambs than the same time last year, while NSW increased their lamb saleyard throughput by more than 20,000. Victoria’s flush of new season lambs does come later in the year than NSW, but the dropping market and Covid-created competition concerns could be encouraging producers to keep them in the paddock.

The national trade lamb indicator has lost 100¢/kg in four weeks, closing yesterday at 698¢/kg. The Victorian trade lamb price has dropped 75¢/kg in just one week to 629¢/kg – more than 200¢/kg below the year-ago price. Western Australia’s Covid bubble has extended to their lamb prices, which sit well above the national average. The WA trade lamb indicator has gained 66¢/kg in the past week to 718¢/kg, just 1¢/kg below the same week in 2019.

If we glance at demand post-processor, we pointed out earlier this week HERE that so far the volume of Australia’s sheep meat exports haven’t as yet lowered. The domestic market remains our biggest single avenue for lamb, however, and the last available data for the consumer price in Australia (June quarter) sits at the highest on record at 1823.49¢/kg. Domestic retail lamb and beef prices have climbed since 2014. While the record retail price in the June quarter is reflective of March’s record high saleyard lamb price, plus the supermarket panic buying that we will not forget, it doesn’t reflect the current returns. A high retail price will not bolster consumption in a slowing economy, regardless of how many “MasterChef-at-home” recreations social lockdown encourages.

What to watch?

All eyes will be on this week’s lamb slaughter numbers and saleyard input as we start to see the impact of processor capacity caps and how producers will react to the falling price.

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Key Points

  • National trade lamb price has dropped 100¢/kg in the past month, as saleyard throughput also decreases.
  • Victorian trade lamb at an 89¢/kg discount to WA equivalent, and 83¢/kg below NSW.
  • Domestic retail price yet to reflect the dip in lamb saleyard indicators, with NTLI 159¢/kg below year-ago levels

Click on graph to expand

Click on graph to expand

Data sources: Meat & Livestock Australia; ABARES , Mecardo

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