Mid-Season Update
It’s hard to believe we’re already midway through the production season Down Under. The turmoil of 2016 continues to influence international meat trade, with Brexit, weather, and geopolitics impacting both supply and demand. A late Spring meant a slow start to the season and expectations for a better season for the industry have eased with fewer animals available than initially expected. The New Zealand Beef + Lamb Economic Service’s Outlook for 2017 forecasts little change in overall exports based on a 3% decrease in lamb offset by an increase in beef cattle of 2.8%. Farmers’ confidence levels are split with cattle ranchers’ confidence relatively higher than their sheep counterparts.
Down under Update: Lamb
The annual lamb production season starts October 1st of each year. At this mid-season point, the story down under is relatively similar to 2016 when the lamb production saw a slight stumble as the season started late. This meant fewer lambs were available at the beginning of the season with farmers holding onto lighter lambs to ‘fatten them up.’
Now, why is New Zealand so important when it comes to lamb? Kiwis are important because 70% of global sheep supply is shared almost equally between Australia and New Zealand. Reports suggest that the sheep flock for this year is the lowest it's been since 1943 in New Zealand! This will clearly impact supply. For those who like to make the age-old comparison, to put it into people terms there are still 6 sheep for each person in New Zealand as of 2016.
Fun Fact:
At the peak of production in 1982, there were 22 sheep for each person in New Zealand.
In New Zealand, the decrease in the sheep population on the previous year in June (2015) is largely driven by farms moving towards raising beef cattle and an unfavorable summer in some regions. Dry weather meant affected farmers had to reduce their flock.
Lambs are younger and lighter at the beginning of the season. Thus, lighter cuts are more plentiful in the first quarter of the year, such as 8 to 10 oz. frenched racks, but the more typical 16 to 18 oz. are harder to come by. As the season progresses lambs grow and put on weight, and the average rack weight increases and lighter racks become scarce. If an average carcass weight of 26 lb is required for an 11 to 12 oz. rack, think how small a lamb must be to produce an 8 to 10 oz. rack!
The reduction in NZ supply may be good for Australian exporters, but with strengthening domestic demand within Australia there will be pressure there too. There are mixed signals for the export market. Exports are predicted to fall as more Aussies start cooking up lamb on the Bar-B. As Aussies enjoy more and more premium grass fed lamb, combined with a decline in the number of Australian lambs slaughtered early in the season there has been pressure on export supply to the States. We should hopefully see numbers come back as heavy lambs arrive and provide some relief later in the season.
An interesting side note on Australia’s growth, a recent agricultural report suggests that Australia’s $6.5 billion dollar sheep industry needs 22 million more sheep to meet the forecast increase in global demand by 2040. In order to take advantage of this growth opportunity, improving productivity means the expansion of the bottom line: farm management efficiencies and getting higher productivity. As seen in the following graphs, lamb production is experiencing year on year growth as the average weight (in KG) is continuing to increase. Here at Pilot Brands, we are continuing to innovate our processes and streamline our premium grass fed meats right to your table!
 
The million-dollar question is:
Will consumers see a softening on prices for this season?
The simple answer is it’s unlikely with strong demand and reduced international supply.
If you’d like to revisit a topic covered in our newsletters, have questions or a subject of interest about grass-fed meats that we can include in one of our updates, feel free to drop us a line at info@pilotbrands.com, Facebook or send us a tweet on Twitter. We’re always delighted to hear from you.
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