Mecardo Analysis - Year of the pig, decade of the sheep

By: "Farm Tender" News
Ag Tech News
Apr 11, 2019
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By Matt Dalgleish | Source: DAWR, Mecardo.

This article is bought to you by Reading Transport. 

Last month we focused on the growth in demand for Aussie lamb from the USA. This piece looks at the current strength in lamb and mutton exports more broadly across the first quarter of 2019, with a spotlight on Chinese demand now and into the future.

Lamb export volumes for quarter one of 2019 have been trending along the upper end of the normal range, running 20% above the five-year trend and 12% above last season (Figure 1). The expansion in offshore lamb demand has been noted across all of Australia’s key export destinations for the quarter, with the USA recording the greatest percentage gain on the five-year average at 32% due to a surge in volumes in February.

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Consignment of lamb to the Middle East are 24% higher over the quarter, while shipments to Asia are up 21% on the five-year trend. However, a breakdown of the Asian region shows that Chinese demand is the underlying driver for Asian growth, with quarterly flows to China 36% higher than the five-year average.

On the surface, a similar picture is emerging for mutton exports, with the 2019 trend running 11% above the five-year trend and 19% higher than the first quarter of 2018 – Figure 2. However, analysis of the key export destinations shows that the growth is coming out of the Asian region. Indeed, Australian mutton exports to the Middle East are 21% below the five-year trend for the quarter, while flows to Europe are 30% lower.

2019-04-11 Sheep 1

In contrast, mutton consignments to the Asian region are up 44% for the quarter, compared to the five-year average flows, and filtering the data for mutton exports to China alone shows the demand over the quarter has increased by 85%.

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Combined mutton and lamb exports from Australia to China saw a surge during 2013, capturing 25.3% of the total flow and nearing 100,000 tonnes swt of product shipped. After a lull during the 2015/16 season Chinese demand returned with a vengeance to see 2018 record over 107,000 tonnes shipped and capturing over 24.1% of total mutton and lamb exports. So far this season the volume of mutton and lamb exports to China sits at 25.5% of total flows – Figure 3.

2019-04-11 Sheep 3

Key points

* First quarter lamb export flows are running 20% above the five-year average and 12% higher than in 2018, with growth in demand noted from all key destinations

* Mutton export flows are trending 11% above the five-year pattern and sit 19% higher than during quarter one of 2018

* Currently Chinese demand for Australian sheep and lamb exports sits at 25.5% of the total 2019 volume, eclipsing the previous record of 25.3% set in 2013

What does this mean?

In 2018, the number of households earning over $US35,000 per annum in China was estimated at 12.5 million. There is a clear link between increased consumption of red meat protein and increased levels of wealth.

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It is forecast that by 2022 the number of Chinese households earning over $US35,000 per annum will be 27.3 million. The growth in demand we have seen in lamb and mutton exports from Australia to China may have a way to run yet. It may be the Chinese year of the pig in 2019 but it is shaping up to be the decade of the sheep, so long as the Chinese economy and their forecast wealth growth remains on track.

www.mecardo.com.au