Mecardo Analysis - Winter lull for lamb and mutton exports

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By Matt Dalgleish | Source: DAWR, Mecardo. 

Key points. 

· Total lamb exports for July 2019 have come in 1.6% below the five-year average for July at 18,238 tonnes swt.

· Total mutton exports for July are 13% below the five-year average pattern at 7,299 tonnes swt.

· Despite easing month on month volumes since April 2019, combined mutton and lamb exports to China for July are still running 80% over the five-year trend.

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Release of the July Department of Agriculture and Water Resources (DAWR) red meat export trade volumes show that lamb and mutton consignments have continued to soften toward levels consistent with their normal seasonal troughs that occur during winter. High domestic prices for lamb and mutton and low supply are even making their presence felt in softening Chinese demand, an export market that was running red hot earlier in the year.

Total lamb exports from Australia have dipped below 20,000 tonnes swt for the first time this season. The July figure was reported at 18,238 tonnes, which is only 1.6% below the five-year seasonal average trend for July (Figure 1).

Most destinations for lamb trade in July were running below their respective five-year patterns, except for Asia that is, which is still enjoying the boost provided by above average flows to China. Lamb volumes to the USA were 15% under the July average, the Middle East was 22% below and Europe 32% softer. In contrast, Asian demand was 28% above the five-year average trend after being given a healthy push by China, which reported consignments up 62% on the seasonal July average.

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Total mutton export flows dipped under 10,000 tonnes swt for the first time this season to make its first appearance below the five-year average trend during July. Total mutton shipped was reported as 7,299 tonnes, 13% below the July five-year average level (Figure 2).

Mirroring the lamb scenario, the Middle East is reporting July mutton flows that are 51% under the average and European consignments are 94% softer. Meanwhile, mutton shipped to Asia was 29% over the five-year trend for July with solid demand out of China leading the charge, running 81% higher than the July average.

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Combined total flows of mutton and lamb to China have eased in recent months to see the lowest level shipped so far this season at 8,089 tonnes swt in July (Figure 3). Despite the reduced trade flows during July, the levels are still a respectable 80% above the five-year average trend for July.

What does this mean?

Apparently, the high domestic price of lamb and mutton during this winter and the tighter availability has made an impact on trade flows. Nevertheless, the spring flush and lower prices are just around the corner so we should see volumes increase in the coming months.

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The combined flow of mutton and lamb to China usually doesn't reach a seasonal peak in volume until November (Figure 3) and is nearly double the winter low point. Given the ongoing issues within the pork sector in China we may be in for some huge monthly trade volumes to China once the flush gets underway in earnest.

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