More tariffs and quota changes are popping up, so let’s reassess the red meat export outlook and its impact on the domestic livestock markets. As we discussed last week, Australian beef headed to the US remains tariff-free for the time being, however sheepmeat hasn’t been so lucky. The latest round of tariffs out of America which are said to be targeting countries not actively addressing forced labour have impacted Australian sheepmeat, increasing the current rate from 10% to 12.5%.
What does this mean for Australian exports overall? Probably very little in the short-term, as domestic supply seems to currently be the main driver for falling volumes. The latest lamb export figures for July show us that volumes have fallen below the five-year average, dipping to the lowest July tally since 2022. However, putting this into a different perspective, it was also the highest July monthly volume of any year on record prior to 2023. This means that outside of the recent record-breaking years, monthly lamb exports remain historically strong.
Year-to-date lamb volumes are sitting about 11% lower year-on-year, which is trending above the Australian lamb slaughter which was down by 14% for the first half of the year. With the increased US tariff only kicking in one week before the end of July, the trade for that month was done and dusted, but the monthly volume still came in below the five-year-average for the first time this year. That being said, the US maintained the number one market share position of Australian lamb, taking more than a quarter of all product headed overseas.
Total sheepmeat production in the US was down nearly 19% year-on-year in May, which teamed with lower beef supply to push domestic meat prices higher again. Subsequently, Steiner Consulting Group reports the average price for a frozen boneless Australia leg of lamb at the start of June (pre-tariff increase) was 53% higher than the same time last year.
Looking at other avenues, China and the United Kingdom were the only two major markets which bucked the trend for lamb in July with volumes falling from the previous month but staying above the five-year average. China currently has a 21% share of Australian lamb’s market, which is up from 18% last year and 15% the year prior. Year-to-date, the Chinese intake is 7% higher than the same time last year. Some of this has come at the cost of Australian mutton however, with China remaining the largest single-country market, even though it currently sitting at its lowest share in a decade.
Total Australian mutton exports fell to just above 5000 tonnes in July, which is less than half of the five-year average, and is the lowest monthly figure since 2011. Year-to-date mutton volumes are down 38%, which while significant, follows the same trend as lamb and remains above the fall in Australian sheep slaughter for the first half of the year, which was down 41%. Destination markets fell in fairly equal measure across the board, with the Middle East (namely the UAE) showing slightly more resilience than others.
What does it mean?
Export demand is keeping pace with Australian supply so far this year. While Lamb slaughter could pick up in the spring; if the weather stays on the producer’s side, supply will likely be taken up by those missing out on mutton. Given the red meat shortage in the US, the slight tariff uptick isn’t likely to have a noticeable impact, however current pricing is likely to be putting pressure on American consumers. What everyone is watching now is if that is where the US tariff on Australian sheepmeat will stay, given the current “global safeguard investigation” being undertaken by the US on the impact of imported lamb to their domestic industry, with talk that the outcome could push tariffs as high as 30%.
Key Points
- Lamb exports dipped below the five-year average volumes last month, with year-to-date totals now 11% lower year-on-year but remaining above falling slaughter.
- The US remains Australia’s largest lamb market, with the increased tariff unlikely to impact trade in the short term due to supply.
- Australia’s mutton exports fell more significantly in July, to the lowest monthly volumes since 2011.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Meat & Livestock Australia, Steiner Consulting Group, Mecardo
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