MLA Sheep and Lamb Analyst, Kara Tighe, outlines the opportunities and challenges for the Australian sheep industry in 2010.

1. 2010 sheep and lamb industry projections
Australian sheep and lamb industry
projections 2009
18th February 2010
Kara Tighe – Sheepmeat Analyst
January 2008
Kara Jones

2. Sheepmeat industry developments in 2009
On-farm
• Lamb sale prices up 13%-26% & 40% for sheep in 2009
• Lamb production up 4%, mutton down 16%
• Sheep flock down 7% in 2009 & 26% in 3 years
• Prime lamb profitability increasing & attractive relative to most other
enterprises in mixed farming areas
• Drought receding in many areas
• Growing evidence of desire to halt flock liquidation & rebuild in some areas
Off-farm
• Lamb exports up 9% (value up 17%), mutton back 15% (value back 1%), live
exports down 15% (value up 1%)
• Domestic lamb consumption up 1%, expenditure up 10%

3. Prospects for 2010…
• Rate of the Australian flock decline to slow to 2% in 2009-10
• Requires a further 15% fall in sheep turnoff in 2010
• Limited sheep supply to reduce mutton supply, exports and live
sheep exports
• Lamb production to increase 2%
– Higher lamb slaughter due to favourable season & shift to prime lambs
– Retention of more ewe lambs to prevent larger increase in lamb supply
• Small rise in both domestic lamb consumption and lamb exports
• Saleyard prices to exceed 2009 averages

4. For now, the season looks favourable
A poor southern wet
season last year
(April – November
2009)
Good falls during
February…especially
in NSW, but needs to
be followed up with
an Autumn break

5. Drought & shift to cropping sees further sharp falls
in sheep flocks in 2008-09
net change million head (June 2009 compared to June 2008)
0.5
+1%, to 10 +4%, to 4.1
million head million head
0
-5%, to 2
million head
-0.5
-1
-1.5 -5%, to 25
million head
-2
-12%, to 14.8
-12%, to 15.5 million head
million head
-2.5
WA VIC NSW SA TAS QLD

6. Slower rate of flock decline expected in 2010
million head
200
150
100
50
0
90 92 94 96 98 00 02 04 06 08 10f 12f 14f
31 March until 1999, 30 June from 2000
Source: ABS, MLA forecasts f = forecast

7. Another sharp decline expected in sheep turn-
off
million head
25
slaughter live exports
20
15
10
5
0
90 92 94 96 98 00 02 04 06 08 10f 12f 14f
Source: ABS, MLA forecasts f = forecast

8. By extension, mutton exports to fall
'000 tonnes swt
250
Africa North America Middle East Asia other
200
150
100
50
0
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10f
Source: DAFF, MLA forecasts f = forecast

9. National average sheep saleyard prices
A¢/kg cwt
350
2010 2009 2008 2004-08 average

300
250
200
150
January 2010 national mutton prices averaged 315 ¢/kg cwt
100 ↑72% on January 2009
↑104% on 5-year average (2004-2008)
50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: NLRS

10. Lamb industry outlook for 2010

11. Shift from wool to lamb production
'000 tonnes cwt lamb '000 tonnes cln wool
450 600
lamb production wool production
400
500
350
300 400
250
300
200
150 200
92-93 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09e
Source: ABS, AWEX

12. Slow growth expected in lambs as ewe flock
stabilises
million head
60
50
Breeding ewe flock
breeding ewes
lamb slaughter
40 ↑1%/year
30
20
Lamb slaughter
↑2%/year
10
0
98-99 00-01 02-03 04-05 06-07 08-09 10-11f 12-13f
Source: ABS, MLA forecasts

13. Shift to prime lambs sees increased ewe proportion
of the flock & increased lamb turnoff rate
%
70
breeding ewes as a % of flock
lamb slaughter as a % of breeding ewes
60
50
40
30
20
94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09 10-11f 12-13f 14-15f
Source: ABS, MLA forecasts

14. Lamb production to increase 2% in 2010
'000 tonnes cwt kg/head
600 25
production carcase weight
500
23
400
21
300
19
200
17
100
0 15
90 92 94 96 98 00 02 04 06 08 10f 12f 14f
Source: ABS, MLA forecasts f = forecast

15. Lamb demand in 2010

16. Surge in both domestic (10%) & export value (20%)
for lamb in 2009
domestic A$ million export A$ million FOB
2500 1200
domestic expenditure export value
1000
2000
800
1500
600
1000
400
500
200
0 0
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09e
Source: ABS, DAFF, MLA estimates

17. Local consumption for lamb to continue upward
trend in 2010 and beyond
'000 tonnes cwt A¢/kg retail weight
300 1500
consumption retail price
250 1200
200
900
150
600
100
50 300
0 0
92 94 96 98 00 02 04 06 08 10f 12f 14f
Source: ABS, ABARE, MLA forecasts f = forecast

18. Australian lamb exports to grow 2% in 2010
exports '000 tonnes swt % of production
200 50
exports % production
40
150
30
100
20
50
10
0 0
90 92 94 96 98 00 02 04 06 08 10f 12f 14f
Source: DAFF volumes, ABS values, MLA forecasts f = forecast

19. NZ lamb exports to recover 3.4% in 2009-10
'000 tonnes swt
350
300
250
200
01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10f
September year
Source: Meat & Wool NZ

20. Lamb exports to the US
- up 2%, to 39,000 tonnes swt
'000 tonnes swt A$ million
50 350
volume value
300
40
250
30 200
20 150
100
10
50
0 0
92 94 96 98 00 02 04 06 08 10f
Source: DAFF volumes, ABS values, MLA forecasts f = forecast

21. Lamb exports to the Middle East
- up 8%, to 38,900 tonnes swt
'000 tonnes swt A$ million
40 200
volume value
30 150
20 100
10 50
0 0
94 96 98 00 02 04 06 08 10f
Source: DAFF volumes, ABS values, MLA forecasts f = forecast

22. Lamb exports across other markets in 2010
% change 2010 on 2009
5
0
24,900 14,300 11,500 7,200 5,200
tonnes swt tonnes swt tonnes swt tonnes swt tonnes swt
-5
-10
-15
2,400
tonnes swt
-20
China/ EU Pacific South Canada South
Hong Kong East Asia Africa
Source: DAFF, MLA forecasts

23. Lamb prices to maintain momentum
A¢/kg cwt
500
400
300
200
100
0
00 01 02 03 04 05 06 07 08 09 10f
Source: MLA's NLRS

24. Slaughter lamb farm incomes to continue
improving in 2009-10
$'000 (2008-09 dollars)
200
farm cash income
150 farm business profit
100
50
0
-50
-100
90-91 92-93 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09
financial year
Source: ABARE

25. Sheepmeat industry overview
• Lamb & sheep prices to remain high & move up again over medium
term
– Steady rise in local and overseas demand
• Improvement in farm incomes on higher prices, lower costs & higher
turnoff
• Prime lamb industry keeps expanding - defying recent falls in the
sheep flock
• Flock liquidation to slow this year and end by 2012
– Further 13% fall in sheep turnoff required in 2010 (on track)
Threats:
• Price correction
– Some risk of customer backlash and a ‘correction’
• Drought continues flock decline & threatens growth in lamb supply