Reassessing a ‘good’ price for mutton


Last week Mecardo looked at the mutton market, and how it related to the levels of last year. This week we take a deeper dive into pricing and long-term supply, and how we might have to reassess what is a ‘good’ mutton price.

The anecdotal evidence suggests that mutton isn’t hard to move for exporters, but the margins on mutton aren’t great compared to lamb.  Looking at slaughter patterns adds some weight to this theory. 

In absolute number terms, there have been 1.74 million head of increased slaughter space created for the year to date.  Just over 74% of the extra slaughter space has been taken up by lambs, despite mutton being cheaper year on year.  This is a pretty good indication that the export demand for lamb has lifted much more than for mutton.

We’ve seen the absolute price charts for mutton, so Figure 1 shows the mutton discount to lamb  Mutton has recovered from spring lows somewhat, but remains around the 60% mark in terms of discount to lamb.

The levels are similar to those of 2000-2009, which was a period of constant decline in the flock (Figure 2).  When the flock went through a rebuild in 2011 and 2012 the mutton discount shrunk to the 20-30% range.  A return to flock liquidation in 2013 saw the discount widen again.

A lower flock and a rebuild saw mutton recover ground again through 2015-2018.  The 2018-2021 flock liquidation came from a lower peak but also coincided with the African Swine Fever (ASF) outbreak in China, which saw demand for mutton peak.

As such the 2018-2021 period saw good mutton supplies, weak demand from restockers, but also a relatively small mutton discount to lamb.

Since late 2022 demand from restockers for sheep has declined, and the flock has moved into liquidation mode.   Add to this recovery of the Chinese pig herd, and in terms of supply and demand, we are back in the 2007-08 territory.

Looking forward Figure 2 shows the flock at a 16-year high, and supply should remain strong for some time yet.  The lack of live exports from 2028 will add local mutton supplies, with flocks being liquidated in the west, to match supply with slaughter demand in WA.

What does it mean?

The mutton price at 50-60% to lamb appears to be its lot for the time being. Producers have enough sheep, and there is little incentive to take country off cropping or beef. Increased world beef prices should have an impact on mutton demand, but we haven’t seen it yet.

Mutton looks likely to be beholden to the lamb market for any improvement in prices in the near future.

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Key Points

  • Increasing slaughter space is being used largely for lambs rather than mutton.
  • Comparing supply and demand to historical levels, the current mutton discount to lamb looks about right.
  • Mutton likely will require stronger lamb prices for any increase.

Click on figure to expand

Click on figure to expand

Data sources: USDA, Nutrien, Mecardo

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