Last week we looked at sheepmeat demand, with more than 50% of what we produce here in Australia headed overseas. What we found was that while the world's love of Aussie lamb and mutton wasn’t diminishing, it also hadn’t increased enough to be the only explanation for current strong domestic prices - predominately because the volume of produce isn’t there to be demanded. And so, it must be the other side of the only real market story - supply - which is the real current driver. This won’t be news to anyone in the sheep game - but let's look back at the last supply crunch to get a gauge on how it might impact prices and throughput from now through to spring.
Let’s use 2020 slaughter figures as a comparison, as it was the last year we moved from a drought-induced turn-off towards the intention of rebuilding, with actual rebuilding not entered until 2021. Turn-off rates and flock figures tell us we are yet to hit a rebuild phase in 2026, and in fact, the significant turn-off in the past two years has almost completely diminished the ability to do so in the short term, however the changing of seasonal conditions and sentiment are comparable to 2020. The 2020 flock figure and the forecast figure for 2026 are also as close as any in the past five years.
National combined sheep and lamb slaughter is currently averaging 509,000 head, which is still significantly higher than 2020, but is actually a bigger year-on-year fall comparatively. The dip from the same period in 2019 to 2020 was 16%, while for the year-to-date in 2026 compared to last year the decline has been 33%. The average slaughter for the year-end in 2020 was lower again, but only by 2%. This would bring this year’s weekly throughput to well below both the five and 10-year average figure.
Breaking this down further, and the national sheep slaughter average weekly figure for the year-to-date is much closer to the same period in 2020, sitting just 3% higher. Year-on-year it has fallen 28%, while in 2020 it was 23% lower. Looking through to year’s end, and in 2020 the average weekly mutton kill was a further 8% down. This would bring this year’s sheep throughput down to the third lowest level in more than a decade, with 2021/22 the only lower years since at least 2013. As we can see from the chart, sheep slaughter in 2020 and 2026 are much more inline than the total kill picture.
Quickly looking at lamb, and while the year-to-date national slaughter according to weekly figures remains about 2 million head above the five-year-average, the decline from the same period last year is 14%, compared to a 10% drop looking at the same equation in 2020. Lamb supply ended the year 7% lower year-on-year in 2020, before increasing every year through to 2024.
What does it mean?
We can see from 2020 that the industry doesn’t go from destock to rebuild overnight, and while the turn-off may have slowed, so too has the capacity to bring numbers back up. While overall throughput is sitting higher than 2020, we can see that year-on-year decline is actually more significant – and if that year is any indication, it will continue to fall. Plus, of course processing capacity is at a different level than it was six years ago. In terms of what this means for markets, the National Mutton Indicator is currently averaging a record 782c/kg for the year so far. And 2020 held the previous record for the same period at 628c/kg. The year-end NMI average fell 5% to 606c/kg by the end of 2020. If the NMI drops a similar amount this year, it will close at 743c/kg, 15% above the previous record set in 2021.
Key Points
- Forecast flock figure for 2026 are the lowest since 2020.
- Sheep supply is tracking in a similar way to the last seasonal turn-around in 2020, however year-on-year decline is more significant.
- Similar story for lamb as year-to-date slaughter remains above the five-year-average but drops substantially from 2025.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Meat & Livestock Australia, Mecardo
