Australian and New Zealand sheep producers are enduring torrid market dynamics with sheep prices falling to the equivalent of just €3.50/kg to €3.80/kg. The latest European Commission sheepmeat market update shows prices in Australia falling to below the €3.50/kg mark. This is in the region of €1.80/kg lower than June 2022 with markets extremely volatile over the last 12 months as reflected in the price graph.

Meat and Livestock Australia (MLA), the marketing body similar to Bord Bia in Ireland, reports that a “high supply of lambs (which have been mostly held back due to wet conditions from 2022’s spring flush) has provided processors with large supplies and the luxury of choice”.

The organisation states that the large volume of lambs available and booked into factories is significantly reducing demand for finished lambs. Recent flock recovery is also contributing significantly to the higher numbers on farms with the sheep sector experiencing relatively high returns in 2021 and the first half of 2022 and fueling growth in ewe numbers.

This growth in ewe numbers is also said to be negatively affecting the mutton trade with prices well back in sales yards and factories. The drop in demand and lower returns in the Chinese market is compounding issues with Australian processors looking further afield to market lamb.

New Zealand exports

The downturn in the Chinese market is contributing significantly to the sharp fall in New Zealand farmgate sheep prices since August 2022. The New Zealand export market has become increasingly reliant on the Chinese market over the last decade with China’s market share of New Zealand exports rising from about 12% in 2010 to over 50% in 2022.

With the Chinese market subdued, New Zealand and Australia have been directing a higher volume of sheepmeat exports to the EU and UK markets. EU sheepmeat imports for the first three months of 2023 from New Zealand increased by 38% to 18,922t.

Reports indicate there is also significantly higher volumes of New Zealand sheepmeat in the British market in recent months. The pressure on prices in Australia and New Zealand and higher volumes of sheepmeat is a worry for EU and British producers, especially given the free trade agreement which has now come in to place with the UK and Australia.