Mecardo Analysis - Lamb exports in low spirits
- By: "Farm Tender" News
- Ag Tech News
- Oct 11, 2018
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By Nathan Denny | Source: DAWR, MLA, RBA, Mecardo.
Lamb export volumes have been in decline since peaking in May this year. The September release of trade figures from the Department of Agriculture and Water Resources (DAWR) shows that lamb exports have fallen for the fourth month in a row. This piece looks at price and supply factors to see what is behind the slump in volumes.
Dry conditions during quarter two of 2018 encouraged producers to destock and the extra supply of lamb showed up in the higher than normal volume of lamb exports from April to July. At their peak in May, lamb export levels were 29.3% above the seasonal average. However, by the end of September exports had fallen by 21.3% and breached below the 70% range (Figure 1).
Total lamb export volumes during September were down 25% on last year’s levels. This drop was reflected in every export destination for Australian lamb. Exports to the USA were down 35.9%, Asian consignments were 20.8% lower and the trade to the Middle East was off 10.4%.
From May to September, the ESTLI rallied 31.3%. Higher domestic lamb prices were offset somewhat by a depreciating Aussie dollar. In May the AUD peaked at 75.8¢ while the current AUD sits at 70.7¢, a fall of 6.7%.
The Eastern States Trade Lamb Indicator (ESTLI) hit a peak of 880¢/kg in September, but the falling Aussie dollar created a buffer from export prices rising to the same magnitude as the domestic market. It appears that robust movement in the ESTLI was not the key factor for the slump in lamb trade volumes as the higher domestic price for lamb hasn’t made its presence full felt in export price values (Figure 2).
Lamb slaughter levels along the East coast have been trending very much below normal in recent months. May and June saw lamb slaughter numbers peaking above the normal range but since then slaughter levels have fallen off quite dramatically, down by 24.1%.
Declining lamb slaughter numbers as seasonal conditions worsened appear to have led to a shortage of supply in the market. Also, lighter lambs being turned off due to the dry conditions may be another contributing factor to fewer tonnes being exported.
Nathan Denny is a second year Marcus Oldham Agribusiness student currently undertaking his internship with Mecardo. He comes from the Southern Riverina, where his family produces cereals, rice and corn.
Key points
* Lamb export consignments have been in decline for the fourth straight month.
* The falling AUD has created a buffer for the rising ESTLI.
* Unseasonably low slaughter numbers are impacting lamb exports.
What does this mean?
The beginning of the Spring flush should see an increase in lambs from Victoria hit the market and start to address some of the supply concerns hampering export flows. We’ve already seen an impact on price with the ESTLI shedding value in recent weeks and over the next few months lamb export flows should start to recover, bringing volumes back in line with the normal seasonal trend.
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