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Prospects for global sheep markets &
productionPeter Weeks – economic consultantDRAFT presentation to agri benchmark global forum, Madrid 16 June 2016
Is sheepmeat on a long-term slide? The global sheepmeat price has halved since mid-2011 Economic growth has slowed Population growth has slowed China’s imports of mutton fell 20% & lamb fell 80% in the past year Production is hitting up against land, water & environmental
constraints Competing meats are benefiting from lower feed grain prices
0
20
40
60
80
100
120
140
160
2011-0
1201
1-04
2011-0
7201
1-10
2012-0
1201
2-04
2012-0
7201
2-10
2013-0
1201
3-04
2013-0
7201
3-10
2014-0
1201
4-04
2014-0
7201
4-10
2015-0
1201
5-04
2015-0
7201
5-10
2016-0
1
FAO Global Meat price Indices (2011=100)
Sheepmeat
Beef
Pig meatPoultry
On the contrary the future for sheepmeat is bright!Sheepmeat’s unique characteristicsLatest global market demand and supply situation What is the future for sheepmeat?
Issues critical to the futurehttp://www.dailymail.co.uk/news/article-485262/Springtime-lamb-born-October-Ewe-got-joking.html
The role of MLA• MLA is a producer owned, not-for-profit company and not a political body.• MLA is a responsible for research and marketing in the Australian red meat industry • MLA investing in initiatives that contribute to: Producer profitability Sustainability Global competitiveness
• Includes Market Intelligence • Funded by a levy on every animal sold
(1.3% of the price of lambs/0.3% price sheep/0.5% price goats/0.4% price cattle)
Sheepmeat’s unique characteristics• A niche product in the developed world & likely to become more niche• Only 10% of production is traded internationally with only two significant
exporters• The producing and consuming countries are diverse• A widely consumed & sometimes preferred product in the developing world• Sheepmeat production is often tied to other products (wool, skins, milk, crops, cattle)
Sheepmeat has only a small share of world meat consumption2015 total: 311.3 million tonnes
22%
38%
36%
4%
BeefPorkChickenSheepmeat
Source: OECD-FAO (cwe; rtc for chicken)
While sheepmeat consumption has grown its share has declined further
050
100150200250300350 million tonnes
0
2
4
6
8
10% sharepig meat poultry meat beef sheep meat sheep meat share (right)
Source: FAO e = estimate, f = forecast
The largest declines have been in the traditional sheep countries: Australia, EU & Uruguay
Australia
EUUruguay
NZ
Lamb is most salient and bought most in Saudi, UAE and Australia. Less prominent in Japan, Korea, Indonesia and Philippines
CH2. Which types of meat have you bought in the last month to prepare for a meal at home? CH9. How many meals that included the following meats have you eaten in your household in the last 7 days?
Bought in last month (CH2)%
No. of meals in last 7 days (CH9)Mean score
3
7
9
9
13
27
30
35
37
41
59
61
62
Korea
Philippines
Indonesia
Japan
Taiwan
Malaysia
AVERAGE
USA
Canada
China
UAE
Australia
Saudi
0,1
0,1
0,2
0,4
0,5
0,5
0,6
0,7
0,8
0,8
1,3
1,9
2,5
Japan
Korea
Philippines
Indonesia
Canada
Taiwan
Malaysia
USA
Australia
AVERAGE
China
UAE
Saudi
Lamb awareness & purchases LAMB
Countries included
Source: MLA Global Research
a niche product in many countries & regions17,8%
48,9%
30,7%
2,6%EU Beef
PorkChickenSheepmeat
29,8%
24,4%
45,5%
0,3%US
22,8%
43,6%
33,1%
0,4%Japan
36,5%
15,2%
47,4%
0,8%South America
Sheepmeat important in Africa, India, the Middle East, Aust/NZwith small but significant shares in Spain and Asia (including China)
18,1%
33,0%43,5%
5,5%Spain
13,0%
51,0%
29,8%
6,2%Asia
25,9%
23,8%40,8%
9,6%Australia
9,9%0,5%
79,1%
10,5%Saudi Arabia
38,9%
9,2%33,2%
18,7%Africa
BeefPorkChickenSheepmeat
21,4%
6,5%
54,3%
17,9%India
8,3%
65,6%
20,9%5,2%
China
Sheepmeat’s unique supply characteristics
Global sheepmeat production rising only slowly
0
2000
4000
6000
8000
10000
12000
14000
16000
19931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015
Million
tonnes
cwt
NorthAmericaLatinAmericaOceaniaEurope AfricaOther Asia India China
1.9%/year
1.5%/year
Source: FAO
Flocks falling through professional sheep farming countries but rising in Asia, Africa & the Middle EastSheep flock % growth 2000 to 2013
Why have sheep flocks been decreasing in many countries – despite high prices?• Competition for land – dairy in NZ, cropping in Australia• Severe droughts on almost every continent
Oceania, Africa, Asia, China, South America, North America & even in Europe, including Spain • High & volatile feed costs• Falling prices for companion products: wool, skins, crops & cattle• Labour costs – challenge for a high labour use enterprise• Environmental constraints & other government policy changes – especially in China• Predators, especially in Africa & Australia• Aging farmers & lack of ‘generational replacement’
The current global sheepmeat market
Spain
Sheepmeat trade prices have risen over timebut have fallen since 2011
050
100150200250300350400450
2000 Jan
2001 Jan
2002 Jan
2003 Jan
2004 Jan
2005 Jan
2006 Jan
2007 Jan
2008 Jan
2009 Jan
2010 Jan
2011 Jan
2012 Jan
2013 Jan
2014 Jan
2015 Jan
2016 Jan
Index 2
000=10
0
Sheepmeat
Beef
Pig meatPoultry
Source: FAO Meat Price Indices
FAO Global Meat Price Indices
Why the major fall in sheepmeat prices?
0,0
50,0
100,0
150,0
200,0
250,0
300,0
350,0
400,0
450,0
500,0
1990-0
1199
1-01
1992-0
1199
3-01
1994-0
1199
5-01
1996-0
1199
7-01
1998-0
1199
9-01
2000-0
1200
1-01
2002-0
1200
3-01
2004-0
1200
5-01
2006-0
1200
7-01
2008-0
1200
9-01
2010-0
1201
1-01
2012-0
1201
3-01
2014-0
1201
5-01
2016-0
1
Index (
2000=1
00)
Sheepmeat
Beef
Pig meat
Poultry
FAO Global Meat price Indices
• Consumer resistance to higher prices
• Lower feed costs have dropped cost of competing meats
• Demand in developed countries flat (30% battling deflation)
• China’s import demand well down in 2015
• Production has risen in Australia & developed world
The fall in prices has been across all regions
Sheepmeat still has a bright future
France Normandy Mont Saint-Michel with sheep in September via Wikimedia
Global sheepmeat still has a bright future1. Steady demand growth Population growth (though slower) and some recovery in income growth
‘Underlying’ growth in sheepmeat consumption 2015-2020 Due to projected population & income growth alone (if no price rise)
-100
0
100
200
300
400
500
600
China SouthCentralAsiaMiddle East South EastAsia SouthAmerica NorthAmerica Australia EU SouthAfrica Russia
‘000 to
nnes cw
t Due to population growth Due to income growth
Source: Weeks Consulting Services
Total ‘potential’ growth 1.7 million tonnes cwt (13% or 2.4%/year)
Global sheepmeat still has a bright future1. Steady demand growth (>2.4%/year) Population growth (though slower) and some recovery in income growthEspecially in developing world led by China & IndiaFaster growth in Muslim & Hispanic populationsExpansion of modern retail, foodservice & cold storage in developing countries The recent easing of import barriers (especially into China)
Can global sheepmeat supply keep up with demand?
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
19931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024
Million
tonnes
cwt
North AmericaLatin AmericaOceaniaEurope AfricaOther Asia India China
Production growth is expected to improve to 1.9%/year(OECD-FAO 2015-2024)
Forecast40% China40% other developing20% developed
Source: OECD-FAO Agricultural Outlook 2015-2024 database
Sheepmeat to grain price ratio to remain high
020406080
100120140160180200
197219741976197819801982198419861988199019921994199619982000200220042006200820102012201420162018202020222024
Index 2
006=10
0
Global sheepmeat to coarse grain price ratio
Source: OECD-FAO Agricultural Outlook 2015-2024 database
forecast
Sheep farms still profitable in 2015
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
Whole
farm p
rofit %
of rev
enue
Average agri benchmark farms Preliminary
Global sheepmeat still has a bright future1. Steady demand growth (>2.4%/year) Population growth (though slower) and some recovery in income growth Especially in developing world led by China & eventually India too Growth in Muslim & Hispanic populations Expanding modern retail, foodservice & cold storage in developing countries The recent easing of import barriers (especially into China) Price resistance to lower consumption (per person) in developed world2. Improved growth in global sheepmeat supplies (OECD-FAO 1.9%/year) Due to good profitability Productivity growth Only slow production growth in China, and well short of demand rise Resource constraints & environmental restrictions mentioned earlier Modest growth in exports from Australia, and little prospect of significant export expansion from NZ or elsewhere
Sheepmeat prices to remain historically highthough not in real terms
-
1.000
2.000
3.000
4.000
5.000
6.000
19901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024
Global
sheepm
eatpric
e US$/
tonne
forecast
sheepmeat price
Source: OECD-FAO Agricultural Outlook 2015-2024 database
Critical issues and threats• Consumer affordability, especially relative to poultry & pork• Climate change
– Is the last 15 years of extremes an aberration or the new norm?• Environmental constraints/restrictions• Food safety and animal health• Political and religious upheavals• The China factor
China imports critical
Sheepmeat’s unique global characteristicsQuestions?
SHEEPMEAT: unique, niche with a bright future