Australian sheep and lamb industry projections 2009

January 2008Kara Jones

2009 sheep and lamb industry mid-year update

13th August 2009Kara Jones – Sheepmeat Analyst, International Markets and Economic Services

Sheepmeat projections outline

• Price trends– Producer incomes

• Supply issues– Drought– Enterprise shifts– Flock fall

• Demand issues– Global recession– Australian economic slowdown

The Australian sheepmeat industry in 2009…

• Australian flock to have declined a further 7% at June 2009, to 72 million head

• Smaller flock to limit mutton and live export supply• Lamb production to rebound 4%

– Higher lamb slaughter due to better season, high prices, shift to prime lambs and higher Merino lamb slaughter

– Lower feed costs and improved season to lift average carcase weights

• Domestic lamb consumption to increase 2%• Lamb export volumes to rise 5.6%

– Low A$, reduced NZ competition

• Saleyard prices to remain strong– Lamb prices to ease from winter highs, but remain strong– Sheep prices to remain high and move higher into 2010

Average saleyard trade lamb prices

Source: NLRS

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec100

150

200

250

300

350

400

450

500

550

600A¢/kg cwt

2009 2008 2004-08 average 1999-03 average

Australian saleyard sheep prices

Source: NLRS

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

50

100

150

200

250

300

350A¢/kg cwt

2009 2008 2004-08 average 1999-03 average

Prices paid by farmers for key inputs

Source: ABARE

98 99 00 01 02 03 04 05 06 07 08 09s 10f

year ending June

50

100

150

200

250

300Index 1997-98 = 100

fodder and feedstuff prices fertiliser price

fuel and lubricant prices

s = subject to revisionf = forecast

Australian slaughter lamb farm income

Source: ABARE

90-91 92-93 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09

financial year

0

50

100

150

200

-50

-100

$'000 (2008-09 dollars)

farm cash income

farm business profit

Australian rainfall August 2008 - July 2009

Australian rainfall May - July 2009

Revised ABS flock figures at June 2008

WA NSW SA VIC TAS QLD

0

-0.5

-1

-1.5

-2

-2.5

-3

-3.5

-4

net change million head (June 2008 compared to June 2007)

Source: ABS

-8%, to 26.4 million head

-10%, to 3.9 million head

-14%, to 10 million head

-21%, to 2.1 million head

-2%, to 16.8 million head

-16%, to 17.7 million head

National and breeding ewe flock decline

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09f 10f 11f 12f 13f0

50

100

150

200million head

breeding ewes national flock lamb slaughter sheep turnoff

Source: ABS, MLA forecasts

Breeding ewes

Δ 2007 to 2008: ↓ 1.9%

Australian sheep flock

Source: ABS, MLA forecasts

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09f 11f 13f

31 March until 1999, 30 June from 2000

0

50

100

150

200million head

f = forecast

Australian sheep turn-off

Source: ABS, MLA forecasts

91 93 95 97 99 01 03 05 07 09f 11f 13f0

5

10

15

20

25million head

slaughter live exports

f = forecast

Sheep slaughter and mutton production

Source: ABS, MLA forecasts

91 93 95 97 99 01 03 05 07 09f 11f 13f0

100

200

300

400

500'000 tonnes cwt

0

5

10

15

20million head

slaughter production

f = forecast

Quarterly lamb slaughter and prices

2007 2008 2009f 2010f 2011f0

1

2

3

4

5

6

7million head

0

100

200

300

400

500A¢/kg cwt

quarterly slaughter quarterly average saleyard trade lamb prices

Source: ABS, MLA forecasts f = forecast

Lamb slaughter

Source: ABS, MLA forecasts

91 93 95 97 99 01 03 05 07 09f 11f 13f0

5

10

15

20

25million head

f = forecast

Lamb production and carcase weight

Source: ABS, MLA forecasts

91 93 95 97 99 01 03 05 07 09f 11f 13f0

100

200

300

400

500'000 tonnes cwt

15

17

19

21

23

25kg/head

production carcase weight

f = forecast

Domestic lamb consumption and retail prices

Source: ABS, ABARE, MLA forecasts

93 95 97 99 01 03 05 07 09f 11f 13f0

50

100

150

200

250

300'000 tonnes cwt

0

300

600

900

1200

1500A¢/kg retail weight

consumption retail price*

f = forecast

* 2009 retail price = average to June

A$/US$ exchange rate

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec0.5

0.6

0.7

0.8

0.9

1A$/US$

2008 2009

Source: Telerate

NZ lamb exports

00-01 02-03 04-05 06-07 08-09e

September year

0

50

100

150

200

250

300

350'000 tonnes swt

Source: Meat & Wool NZ, NZ Meat Board

Australian vs NZ lamb exports January – June 2009 compared to January – June 2008

Total China MiddleEast

PNG US Mexico Japan EU Korea

0

5

10

-5

-10

-15

'000 tonnes swt

Australia NZ

Source: Meat & Wool NZ, DAFF

Australian lamb exports as a % of production

Source: DAFF volumes, ABS values, MLA forecasts

91 93 95 97 99 01 03 05 07 09f 11f 13f0

50

100

150

200exports '000 tonnes swt

0

10

20

30

40

50% of production

exports % production

f = forecast

Lamb export forecasts and GDP growth

US24%

MiddleEast17%

China9%

Japan7%

EU8%

Pacific7% Africa

9%

other15%

SouthEastAsia4%

US24%

MiddleEast22%

China9%

Japan6%

EU7% Pacific

7%Africa

6%

Other14%

SouthEastAsia4%

2008 2009f

151,600 tonnes swt 160,100 tonnes swt

2%* - 3.8%

1.8%

7.5%

- 6%

- 4.8%

- 0.3%

Source: DAFF, MLA forecasts, IMF *IMF GDP growth forecasts

Lamb exports to the US

Source: DAFF volumes, ABS values, MLA forecasts

91 93 95 97 99 01 03 05 07 09f0

10

20

30

40

50'000 tonnes swt

0

50

100

150

200

250

300

350A$ million

volume value

f = forecast

Lamb exports to Japan

Source: DAFF volumes, ABS values, MLA forecasts

91 93 95 97 99 01 03 05 07 09f0

2

4

6

8

10

12

14'000 tonnes swt

0

20

40

60

80

100A$ million

volume value

f = forecast

Lamb exports to the Middle East

Source: DAFF volumes, ABS values, MLA forecasts

93 95 97 99 01 03 05 07 09f0

10

20

30

40'000 tonnes swt

0

20

40

60

80

100

120

140A$ million

volume value

f = forecast

Mutton exports by regional destination

Source: DAFF, MLA forecasts

93 95 97 99 01 03 05 07 09f0

50

100

150

200

250'000 tonnes swt

Africa North America Middle East Asia other

f = forecast

Live sheep exports

Source: ABS, MLA forecasts

91 93 95 97 99 01 03 05 07 09f 11f 13f0

1

2

3

4

5

6

7

8million sheep and lambs

0

100

200

300

400

500A$ million

numbers exported value

f = forecast

Sheepmeat industry overview

“The Australian sheepmeat industry thus far in 2009 has seen strong export and domestic demand and sales, resilient supply and record high saleyard prices. This is an impressive outcome considering the global financial crisis and economic slowdown and volatile trade conditions. However, this performance has been marred by the continued rapid liquidation of the national flock over the period and the consequent inability of Australia to meet the growing export demand for both mutton and live sheep exports. ”.

Through to 2013:• Sheep turnoff to decline and prevent further major flock falls • Focus on prime lamb production to boost average carcase weights

and lift production• Continued high lamb, mutton and live sheep prices• Lamb exports to reach 179,000 tonnes in 2013 – up 18% on 2008• Strong Middle East demand to keep pressure on Australian mutton

and live sheep supplies

Questions?