Future markets for sheepmeat“Innovations in animal production to meet consumer expectations” Producer Forum University of Western Australia2 August 2007

Peter Weeks Manager, Market Information

Address outline

• Demand for Australian lamb?

• Who are the main customers?– Look at 4 key markets

• Prospects?

Demand for Australian lamb

Demand for our lamb has risen rapidly

both locally and overseas

94 95 96 97 98 99 00 01 02 03 04 05 06p

calendar year

0

500

1000

1500

2000domestic A$ million

0

200

400

600

800

1000export A$ million fas

domestic expenditure export value

Hence, prices are historically high and

production is expanding, despite drought

Source: ABS, NLRS, MLA

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 070

100

200

300

400

A¢/kg dw

0

100

200

300

400

500'000 tonnes cwt

lamb price lamb production

Australian lamb utilisation 2006Total: 398,907 tonnes cwt

Source: DAFF, ABS, MLA

North Asia10%

Pacific3%

Middle East5%

Europe4%

Africa4%

North America15%

other2%

domestic56%

Australian sheep utilisation 2006Total: 347,396 tonnes cwt

Source: DAFF, ABS, MLA

North Asia10%

Pacific2%

Middle Eastmutton16%

Mid Eastlive exports

26%

Europe3%

Africa8%

North America10%

other9%

domestic15%

Lamb market specifications

Light Middle East, Africa, Pacific etc

Light trade Butchers

Trade (20-22kg) Butcher & supermarket

Heavy (>22kg) Export

Europe

USA

Middle East

China

Africa

Japan

…markets share the carcase

The 5 pillars of meat demand

Nutrition

- Essential- 3-4 times/wk

Enjoyment

- quality- popular- interesting

Convenience

- easy to prepare- easy to choose

Red Meat

Integrity

- safe- responsible- ethical

Value for money

- affordable- price ....options

Local lamb demand up

40

50

60

70

80

90

100

110

198019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

06p

Purcell's Demand Index (1980 = 100)

highest

since 1985

• 15 years of good economic growth

• Lift in lamb size and quality– development of a specialist prime lamb industry

• Improved marketing by butchers and supermarkets– Including new lamb cuts

• Successful lamb promotions

• Improved health image of red meat

Local lamb demand up: why?

Lamb carcase weights

Source: ABS

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07

15

16

17

18

19

20

21

22kg dw

Consumers confident in quality

“How do you rate the quality of _______ you buy today?”

7.2 7.47.67.6

1

2

3

4

5

6

7

8

9

10

Beef Lamb Chicken PorkSource: Stancombe 2005

always excellent

never excellent

The

integrity

pyramid

Source: Dr Geoff Spreigel, Sainsbury, 2000

QuickTime™ and aYUV420 codec decompressorare needed to see this picture.

Mums more confident on nutrition

26262626

38383838

24242424

57575757

46464646 44444444

0

10

20

30

40

50

60

2001 2002 2003 2004 2005 2006

% Agree

% mums who limit red meat consumption to avoid possible heath problems

Source: Sweeney, Millward Brown

Roy Morgan Single Source Oct01-Sep06Total Population 18+ who agreed/disagreed with the statementI try to buy additive free food: 110,234

Population 18+ who agree with the statement

I Try to Buy Additive Free Food

40

42

44

46

48

50

OCT01-SEP02 OCT02-SEP03 OCT03-SEP04 OCT04-SEP05 OCT05-SEP06

Additives in food is becoming more of a concern for consumers

3112

24 20

41- 35-44- 47-

-14 -31 -16-21

-18

12

5

139

-100

-80

-60

-40

-20

0

20

40

60

80

100

Beef Chicken Lamb Pork

Very good Excellent Good Fair Poor

There are integrity issues

associated with chicken..

Q - Overall, would you say that the way Australian … are farmed and raised, and the way the chicken industry is regulated is….?

= significant at 95% CI

32 26 29 29

19- 23-

-14

2548

2424

-1223-

-14

9-

16-

-60

-40

-20

0

20

40

60

80

100

Beef Chicken Lamb Pork

Tend to agree Strongly agree Neither agree nor disagree Tend to disagree Strongly disagree

Consumers genuinely worry

about chicken and “additives”

Q - It bothers me that … may contain traces of chemicals and hormones used in rearing the animals

= significant at 95% CI

Only touching the surface of potential demand in

the US – mainly hispanics

91 93 95 97 99 01 03 05 07f

0

10

20

30

40

50'000 tonnes swt

0

50

100

150

200

250

300

350A$ million

volume value

Hispanics a growing part of the US

• 45 million• 61% of immigration• US born hispanics 60% of US pop growth• 3% growth/year• ‘If a meal has no meat, it is not a meal”

• Preference for lamb and goat meat• Unfrozen lamb and goat meat legs, racks and chops

… and now consumers in North Asia

are discovering lamb

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07f

0

5

10

15

20

25

30

35'000 tonnes swt

Japan

China

Hong Kong

South Korea

Taiwan

Lamb Banner for MLA event

Harumi Kurihara – Lamb recipeLamb Poster

Lamb Squeeze Pal

Aussie Lamb promotions 2006-2007:

Promotional materials / tools

Australian Fair at Izumiya Supermarket

Factors considered by North Asian

consumers when buying beef

Freshness

Safety

Clean

Taste

Tenderness

Colour

Average rating

Korean consumers

Safety

Purchasewith confidence

Chemical free

Delicious

Juicy

Price

Average rating

Japanese consumers

List of veterinary treatments by therapeutic category10

List of feed the animal has been raised on9

Address of the above

Name of the abattoir

Phone number of the above

Name of the person or company that organized slaughter8

Phone number of the feedlot7

Breed6

Date of slaughter5

Date the cattle entered the feedlot

Address of the feedlot4

Date of the management commenced

Address of the above

Name of the production process manager 3

Sex2

Date of birth1

Sharp lamb export rise to Middle East and Africa

95 96 97 98 99 00 01 02 03 04 05 06 07f

0

10

20

30

40'000 tonnes swt

total Middle East South Africa other Africa*

Also lamb consumers are increasing

• Global market for Halal food estimated at US$150 billion in 2005• World Muslim population increasing in size and affluence

• Estimates suggest that this market could grow to be worth in excess of US$500 billion.

Lots of lamb growth opportunities

Key overseas growth markets for Australian lamb next decade:

• USA

• China

• Mexico

• India

• GCC, esp. Saudi Arabia & UAE

• EU (if barriers eased)

But globally & locally the big issue may be our

ability to supply

Achieved growth in lamb production in recent

years – particularly in WA

Source: ABS

73 76 81 86 91 96 01 07p

0

100

200

300

400

500'000 tonnes cwt

0

10

20

30

40

50

60'000 tonnes cwt

Australian lamb production

WA lamb production

But flock now lowest since 1925 –

constraining growth potential in short term

90 92 94 96 98 00 02 04 06 08f 10f

0

100

200

300

400

500'000 tonnes cwt

0

50

100

150

200million sheep and lambs

lamb production sheep flock

And sheep supplies are sure to be low

91 93 95 97 99 01 03 05 07f 09f 11f

0

5

10

15

20

25million head

0

50

100

150

200

250¢/kg cwt

Sheep slaughter

Live sheep exports

sheep price

Australian sheepmeat has a strong, diverse and growing

demand base – supply likely to remain the big issue

The integrity challenge provides great opportunities for Australia’s sheepmeat industry …

• essentially natural, minimally processed, nutritionally sound

• the centre of a great family meal

• produced by people passionate about conservation, animal welfare and the environment

Enterprise opportunities for

• further brand development and positioning, based on consumers’ integrity expectations

The Australian The Australian The Australian The Australian sheepmeatsheepmeatsheepmeatsheepmeat industryindustryindustryindustry

WestfieldPenrith Plaza

The Australian The Australian The Australian The Australian sheepmeatsheepmeatsheepmeatsheepmeat industryindustryindustryindustry

But as an industry …

we must continue to be sensitive to,

and respond to mainstream

consumer and community demands.

H Number of lamb sold for slaughter, south-west Western Australia

Average per farm

0

200

400

600

800

1000

1200

1988-

89

1989-

90

1990-

91

1991-

92

1992-

93

1993-

94

1994-

95

1995-

96

1996-

97

1997-

98

1998-

99

1999-

00

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

Slaughter lamb

producers

J Flock composition, slaughter lamb producers, south-west Western Australia

0

10

20

30

40

50

60

70

Rams Ewes Wethers Lambs

%

1994-95

2004-05

WA farm gate prices move volatile than retail

Source: MLA's NLRS, ABS

1999 2000 2001 2002 2003 2004 2005 2006 2007

calendar year

0

1

2

3

4$/kg cwt

0

2

4

6

8

10

12

14$/kg rwt

lamb saleyard price

lamb retail price*

* simple average of forequarter, leg and loin chops

retail up 74% since 1999saleyard up 120%