Prices up, but Aussie lamb remains affordable

Aussie lamb remains affordable on global stage

Livestock
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High Australian lamb prices has little effect on export market as demand remains competitive on global front.

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Sheep producers in the south east of the country continue to look confident as the eastern trade lamb indicator hovers around the 800 cents per kilogram mark.

On Monday the ESTLI eased by 15c to sit at 842c/kg and mutton lifted by 7c to finish at 632c/kg.

But looking at the prices in US dollar terms, both the trade lamb indicator and the mutton indicator have been the highest they have ever been when converted into US dollars.

This could well have an impact on export market demand, but according to Mecardo senior market analyst Adrian Ladaniwskyj, Australian lamb remains highly competitive on the global front.

"In terms of prices, compared to other parts of the world, Australian sheep and lamb is still relatively cheap compared to the domestic prices seen in other parts of the world like the EU," Mr Ladaniwskyj said.

"Compared to the UK and Ireland Australia is actually more than 20pc cheaper, and in France they pay even more for lamb."

He said this has to do with lamb production in Europe and the UK being vastly different when compared to Australia and NZ.

"A lot of this comes down to different production methods and smaller flocks which means higher costs from reduced economies of scale and climatic conditions such as a winter fall of snow can require the seasonal purchase of feed," he said.

"And government support to agriculture in the form of subsidies is available to varying degrees.

"Even the lambs themselves are smaller with the standard EU trade lamb weighing in at 13kg cwt. All this adds up to structurally expensive sheep meat in the EU."

But although on the global stage Australian lamb is considered fairly cheap, New Zealand being our main competitor worldwide, is $2.40, or 30pc cheaper than Australia.

Mr Ladaniwskyj said that spread is expected to widen out over the next couple of months if it follows history.

"This level of discount is much larger than the 10pc average over the last five years; putting Australian lamb at the largest export price disadvantage for years, which could translate to a loss of market share or price a correction if this situation persists into the long term," he said.

Other countries that are exporting into Australia's key markets are Ireland and the UK, who export into the EU, but compared to Australia and NZ the competition is minimal.

"Australia does export into the UK itself, so at the end of the day there is not enough lamb there," he said.

"Considering there is only two real players in Australia and NZ, and considering how expensive lamb is in other countries apart from Australia and the Southern Hemisphere, the fundamentals for lamb looking forward are incredibly positive."

The story Prices up, but Aussie lamb remains affordable first appeared on Farm Online.

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