Mecardo Analysis - Extreme year on year falls in slaughter forecast to continue

This article is bought to you by Marson Industries Australia and Molloy Contracting.

By Angus Brown | Source: MLA, ABS, Mecardo

Key points

· Lamb slaughter fell heavily in June and July but also saw record carcase weights.

· Mutton slaughter was also much lower in June and July.

· Lamb and mutton slaughter will have to remain well below last year to hit MLA forecasts.

Official lamb and sheep slaughter figures for July were released last week, with lamb falling off the cliff in June and July, and sheep easing back. Despite lower slaughter in June and July, lamb and sheep forecasts suggest we'll be running below last year for most of the rest of the year. We also saw a record for lamb carcase weights come and go, despite tightening supply.

We knew from price action, and Meat and Livestock Australia's (MLA) weekly slaughter stats that lamb supply fell in June and July. The official figures confirmed just how far supply declined. June lamb slaughter hit 1.455 million head, which was the lowest monthly level since January 2012.

Ad - For the best Agricultural Tarps in the business call Marson Industries Australia - Ad
Ad - Need Windrowing, Baling and Carting? Central NSW, call Molloy Contracting - Ad 

Figure 1 shows lamb slaughter had a small uptick, gaining 2.3%, but still sat a massive 17% below July 2018. One interesting stat was the record carcase weights reached in June and almost maintained in July.

The lower numbers slaughtered in June came in at an average carcase weight of 23.9kgs (Figure 2). In July, average carcase weights fell back to 23.44kgs, a five month low, but still at the very top of the historical range.

Despite June and July having extremely low slaughter rates, and August also expected to be low, the next four months are also going to have to be tight to hit MLA's slaughter forecast of 21.2 million head.

Figure 1 shows the big supply months of October and November will have to be 14.5% lower than last year to hit the target.

The decline in sheep slaughter in June and July was of a similar magnitude to lambs. The ABS figures had both June and July 15% lower than 2018. It should be noted that 2018 was a strong year, with the 8.5 million forecast for 2019 being a million head lower.

Again, sheep slaughter has not yet been low enough to see slaughter rates track at similar levels to last year for the next four months. To hit the 8.5 million head target, sheep slaughter will have to be 19% below last year's levels (Figure 3).

What does this mean?

Lamb and sheep supplies will have to remain much tighter than last year to hit MLA's forecasts. Tighter supply will always mean stronger prices. We can see from figures 1 and 3 that supply will be stronger than current levels, but tighter than last year.

www.mecardo.com.au

Ad - For the best Agricultural Tarps in the business call Marson Industries Australia - Ad
Ad - Need Windrowing, Baling and Carting? Central NSW, call Molloy Contracting - Ad