Australia-Farmers going back into sheep.

AUSTRALIA-MORE FARMERS WANT BACK INTO SHEEP.

Higher lamb supplies are expected to lead to a gradual decline in lamb prices over coming years, according to the Australian Bureau of Agricultural and Resource Economics’ (ABARE) Australian commodities, released this week.

According to ABARE, average saleyard lamb prices are forecast to slip 0.5%, to 392¢/kg (real terms) in 2009-10 – down from 402¢/kg in 2008-09 as lamb supply remains tight and lamb demand strong.

With a slight rise in lamb slaughter and significantly higher carcase weights, lamb production is forecast to lift 3% in 2009-10, to 418,000 tonnes cwt. Over the medium term, lamb production is projected to increase steadily to 438,000 tonnes by 2013-14, 8% higher than in 2008-09, reflecting strong producer returns.

In contrast, saleyard sheep prices are forecast to average higher over the short to medium term – increasing from 175¢/kg in 2008-09, to 177¢/kg (real terms) in 2009-10 and holding this level to 2013-14. This seems to be conservative, given a lower A$, fall in sheep slaughter and strong export demand for mutton and live sheep.

Sheep slaughter is forecast to decline 10% in 2009-10, to 10.8 million head, assuming producers respond to higher lamb prices by increasing breeding ewe numbers. This fall is expected to translate into an 8% fall in mutton production over the period, to 231,000 tonnes cwt. After reaching a low point in 2011-12, sheep slaughter is forecast to increase slightly out to 2013-14, as overall sheep numbers rise.

Export markets are expected to absorbing the increase in lamb production, with ABARE forecasting a 10% increase in lamb exports during 2009-10, to 156,000 tonnes swt, supported by a 6% recovery in shipments to the US (to 34,000 tonnes swt). In line with the decline in mutton production, mutton exports are forecast to fall 3% in 2009-10, to 146,000 tonnes swt, before reaching a base of 124,000 tonnes in 2010-11.