Mutton volume and price ratios

The makeup of the Australian flock in the late 1980s/early 1990s was unusually skewed toward merino wool production, in relation to the flock and wool clip makeup of the 1950s through 1970s. Since the collapse of the Reserve Price Scheme in 1991 the Australian flock and wool clip has reverted in structure towards the pre-1980s model. With this trend lamb production has risen to levels well above that of the earlier decades.

Figure 1 looks at annual Australian sheep meat production for the past four decades. It compares the proportion of sheep meat production which was mutton and the mutton to lamb price ratio (NSW saleyard per kg dressed weight prices used). In the early 1990s, as the Australian flock was in full on contractionary mode, mutton reached a proportion of sheep meat production of 59%. At the same time, mutton fell to its lowest point to be 12% of the average price for trade lamb, and below 30% for the first half of the 1990s.

From the early 1990s the mutton ratio of Australian sheep meat production gradually trended lower through to 2012. Since 2012 mutton production has basically ranged between 22% and 32% of sheep meat production. As the proportion of mutton was falling the mutton to lamb price ratio was rising.

To better illustrate the correlation between supply and price ratios, Figure 2 takes Figure 1 and splits the two series so that the price ratio is shown on the left hand axis and the volume ratio on the right hand axis, with the volume ratio reversed so that when the proportion of mutton falls it better matches the rise in the price ratio to lamb. A simple linear regression shows the volume ratio for lamb accounts for around 70% of the price ratio across the 40 year period, although the correlation drops to 50-60% when the series is broken into two 20 year periods. Since 2010 the mutton price ratio to lamb has averaged 65%.

There have been some wild swings in sheep meat prices since 2010, with 2023 the freshest of memories. Clearly there is some volatility in sheep meat prices and the mutton to lamb price ratio. Figure 3 looks at this period, comparing the mutton to lamb price ratio with the year on year change in small ruminant slaughter numbers. Slaughter numbers jump around, varying by 15-20% in volatile years. In 2013 and 2023-2024 when the mutton to lamb price ratio fell down to below 50% the slaughter numbers had risen by 18-20%. In a surfeit of livestock to kill, mutton gets pushed to the back of the line, with the relative price falling away. The reverse happens when slaughter numbers fall, mutton becomes more desirable and the price ratio rises to 75-80%. A price ratio of 70% plus of a super strong lamb price delivers very high mutton prices.

In summary a mutton price ratio to lamb of 65% +/- 15% is underpinned by mutton now accounting for around 20-30% of Australian sheep meat production. The mutton price ratio is pushed to the outer limits of this range by year on year changes in small ruminant slaughter numbers, which are usually driven by changes in seasonal conditions.