NATIONAL SHEEP & WOOL UPDATE JULY 2015 · export demand, declining flock size and expectations of a shift to flock rebuilding are likely to keep sheep and lamb prices above . average

NATIONAL SHEEP & WOOL UPDATEJULY 2015

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Per capita consumption of sheep meat is declining in Australia

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NATIONAL SUMMARY JULY 2015

Sheep producers started 2015 with hopes of rebuilding stock numbers after two consecutive years of high slaughter rates. However, lower than average rainfall and strong prices have so far limited stock rebuilding and high slaughter rates have continued. Strong export demand, declining flock size and expectations of a shift to flock rebuilding are likely to keep sheep and lamb prices above average. The wool market has enjoyed a recent rally and the Eastern Market Indicator finished the financial year at 1263 c/kg, up 24%. Wool prices are expected to remain supported given the declining flock size (estimated to have just fallen below 70 million), a lower Australian dollar and continued export demand.

Weather

Growing season rainfall

Rainfall outlook July-September 2015Observed rainfall April-June 2015

Rainfall decile ranges

Production

Source: Bureau of Meteorology (BoM)

Mea

t pro

duct

ion

(‘000

tonn

es c

wt)

No.

of s

heep

(mill

ions

)

Sheep meat production and flock size

Data: Australian Bureau of Statistics (ABS), Meat & Livestock Australia (MLA)

Domestic demand

Con

sum

ptio

n pe

r per

son

(kg)

Total domestic consumption of sheep meat is static, being

supported by population growth yet simultaneously

under pressure from a decline in the amount of sheep meat

consumed per capita.

Data: Australian Bureau of Agricultural and Resource Economics & Sciences (ABARES)

Woo

l pro

duce

d (‘0

00 to

nnes

)

Wool production

Data: Australian Wool Testing Authority (AWTA)

Meat Production (LHS) Flock (RHS) <20 micron 20-24 micron >24 micron

Beef and Veal Lamb and Mutton Pig Meat Chicken Meat Sheep Meat % Total Consumption (RHS)

Source: BoM

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2010 2011 2012 2013 2014 2015500

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Top 3 sheep meat export markets Top 3 wool export markets

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2012 2013 2014 2012 2013 2014 2012 2013 2014 China India Italy

China India Italy 2014 Export Share

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2012 2013 2014 2012 2013 2014 2012 2013 2014 USA China UAE

USA China UAE 2014 Export Share

July 2013 $0.92USD July 2014 $0.95USD July 2015 $0.77USD

Total lamb, mutton and live sheep exports increased in 2014 and exports have remained strong in 2015. Lamb exports to the USA have increased significantly, helped by high meat prices in the USA and a lower Australian dollar. Nevertheless, exports are expected to slow if supply tightens. Wool exports decreased by 10% in 2014, with exports to China down 14%. However, demand from China increased during the first months of 2015, up 22% compared to this time last year.

$

Export performancec/

kg C

WT

Lamb and mutton price

Price

Data: Meat & Livestock Australia (MLA)Data: Australian Wool Testing Authority (AWTA)

Valu

e of

exp

orts

($m

)

Data: Global Trade Information Services (GTIS)

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e of

exp

orts

($m

)

Data: GTIS

c/kg

CW

T

Eastern Market Indicator (wool)

Data: Australian Wool Exchange (AWEX)

Current price as at July 2015

July 2014 Five-year average 80th percentile 20th percentile

Trade lamb18-22kg

576 541 485 543 426

Mutton18-24kg

392 351 313 385 226

Eastern Market Indicator (wool)

1221 1018 1088 1197 992

Lamb (LHS) Mutton (LHS) Live (LHS) Export Share (RHS)

Trade Lamb Mutton

Data: MLA, AWEX

Australian dollar value

19mcn (LHS) 20-23mcn (LHS) 24-27mcn (LHS) 28+mcn (LHS) Export Share (RHS)<

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NEW SOUTH WALES JULY 2015

New South Wales received good autumn rainfall which has helped recent pasture growth, however, the forecast for winter and spring is not as favourable as the 2015 El Niño strengthens. Sheep meat production continues to increase with current season lambs in good condition following the favourable autumn break. Wool production has continued to decline despite gains in fleece weights. It is expected that the number of bales offered will continue falling, however recent price increases may slow this trend.

Significant rain in southern New South Wales has cemented a strong autumn sowing after many areas experienced a dry summer. This rainfall has improved stock water stores that were under threat. A cold winter in the south east is slowing production, however, ground cover is good after a very wet summer. Sheep prices, particularly heavy export lambs continue to please producers. Farmers who were well stocked leading into Christmas have seen their business well positioned. Farmers are now monitoring crops and supplementary feeding in preparation for a good spring.

Trent Bullock – Rural Bank, New South Wales

From the field

Weather

Rainfall outlook July-September 2015Observed rainfall April-June 2015


Source: BoM Source: BoM

Production

Mea

t pro

duct

ion

(‘000

tonn

es c

wt)

No.

of s

heep

(mill

ions

)


Data: ABS

Meat Production (LHS) Flock (RHS)

Bal

es o

ffere

d (‘0

00)

Wool production and average micron

Bales Offered (LHS) Ave. Micron (RHS)Data: AWTA

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ron

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2012 2013 2014 2012 2013 2014 2012 2013 2014 China USA UAE

China USA UAE 2014 Export Share

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2012 2013 2014 2012 2013 2014 2012 2013 2014 China Italy CzechRepublic

China Italy Czech Republic 2014 Export Share


Demand for lamb and mutton increased in major export markets in 2014 with the trend continuing in 2015. Lamb exports saw the largest movement, increasing by 43% from 2013 with greater demand from both the USA and China. Wool exports decreased in 2014 but regained momentum in early 2015.


kg C

WT


Price

Data: MLA

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e of

exp

orts

($m

)

Data: GTIS

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($m

)Data: GTIS

c/kg

cle

an

Northern Wool Price Indicator

Data: AWEX



Trade lamb18-22kg

575 534 490 543 415

Mutton18-24kg

395 353 317 397 223

Northern Indicator (wool)

1241 1027 1118 1246 1008

Fine wool - 17µ 1488 1224 1520 1696 1281

Medium wool - 20µ 1303 1130 1191 1343 1075

Broad wool - 26µ 1055 813 785 848 686

Trade lamb Mutton

Data: MLA, AWEX

Lamb (LHS) Mutton (LHS) Live (LHS) Export Share (RHS) 19mcn (LHS) 20-23mcn (LHS) 24-27mcn (LHS) 28+mcn (LHS) Export Share (RHS)<

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QUEENSLAND JULY 2015

Drought conditions continue to affect the sheep industry in Queensland with below-average rainfall in most areas of the state. In response to challenging conditions, producers continue to sell stock. This has led to an increase in the supply of lamb and mutton and a further decline in the state’s sheep flock. Despite wool prices increasing in recent months the smaller flock and poor seasonal conditions have led to lower wool production as the number of bales offered continues a long-term downward trend.

Queensland is facing a challenging late winter and spring as drought conditions persist. As the country becomes bare of pasture with only limited relief from recent rain, production is down and flock numbers are low. Producers have been shearing early, selling surplus stock and trying to maintain core breeders by seeking agistment or feeding cotton seed. Luckily the markets have remained strong in both re-stocker and mutton. Farmers will be looking for summer rains which will allow them to begin rebuilding flock numbers.

Peter Sealy – Elders, Queensland

From the field

Weather

Rainfall outlook May-July 2015Observed rainfall April-June 2015



Production

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t pro

duct

ion

(‘000

tonn

es c

wt)

No.

of s

heep

(mill

ions

)


Data: ABS


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es o

ffere

d (‘0

00)



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2012 2013 2014 2012 2013 2014 2012 2013 2014 China USA Russia

China USA Russia 2014 Export Share

QUEENSLAND JULY 2015


After a slow 2014 where wool exports halved, 2015 has seen some improvement, up 21% on this time last year, with exports to China increasing by 28%. The upward trend in lamb exports continued in 2014 with a 50% increase from 2013. This was largely driven by trade to the USA which doubled from 2013. Mutton exports to China declined by 21% in 2014 but was offset by significant increases in exports to the USA and Russia.

Export performance

Price

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e of

exp

orts

($m

)

Data: GTIS Va

lue

of e

xpor

ts ($

m)

Data: GTIS

c/kg

cle

an

Northern Wool Price Indicator

Data: AWEX



Northern Indicator (wool)

1241 1027 1118 1246 1008

Fine wool - 17µ 1488 1224 1520 1696 1281

Medium wool - 20µ 1303 1130 1191 1343 1075

Broad wool - 26µ 1055 813 785 848 686

Data: AWEX


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185190195200205210215220225230

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SOUTH AUSTRALIA JULY 2015

Seasonal conditions in northern South Australia have been favourable while a dry autumn in the lower south east has been challenging for farmers. High turn-off rates are expected to continue for now in response to low rainfall and subsequent poor pasture growth. A recent increase in wool prices has led to an increase in the number of bales offered. These prices are expected to hold due to lower wool production.

Reasonable rainfall in the north east and Flinders regions have put stock in very good condition and led to lambing rates of 100%. In contrast, a poor spring and autumn break in the south east means body weights and lambing percentages are both down and many producers are still supplementary feeding. Some processors have reduced killing capacity in recent weeks, however good hook prices are still being received. Current wool prices are high, slowing the recent trend to move to meat sheep. Despite the threat of an El Niño, the industry has a positive outlook, with producers in a strong position after a good 2014. Simon Dundon - Rural Bank, South Australia

From the field

Weather



Source: BoMSource: BoM

Production

Mea

t pro

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(‘000

tonn

es c

wt)

No.

of s

heep

(mill

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)


Data: ABS


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USA China UK 2014 Export Share

SOUTH AUSTRALIA JULY 2015


Lamb, mutton and live sheep exports from South Australia increased in 2014 with greater demand for lamb and mutton coming mostly from the USA. Although lamb exports have continued to rise in 2015, demand for mutton has declined. Exports of wool from South Australia increased slightly in 2014 with a 3% increase to China and a 32% increase to India. Demand from China and India has continued to increase in 2015.


kg C

WT

Price

Data: MLA

Valu

e of

exp

orts

($m

)

Data: GTIS

Valu

e of

exp

orts

($m

)Data: GTIS

c/kg

cle

an

Southern Wool Price Indicator

Data: AWEX



Trade lamb18-22kg

533 537 476 528 413

Mutton18-24kg

323 343 290 364 193

Southern Indicator (wool)

1207 1014 1077 1199 959

Fine wool - 17µ 1456 1223 1477 1664 1256

Medium wool - 20µ 1308 1129 1183 1329 1066

Broad wool - 26µ 1056 813 781 857 667

Trade lamb Mutton

Data: MLA, AWEX


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TASMANIA JULY 2015

Most regions of Tasmania received below average autumn rainfall and dry conditions are forecast to extend through winter and into spring. These conditions have led to poor pasture growth, prompting some farmers to sell stock. Supply is expected to tighten due to low stock numbers, putting upward pressure on prices. Fleece weights are expected to be lower due to poor supply of feed.

A dry spring, summer and autumn has meant Tasmanian farmers are going in to winter with poor pasture and low weight on sheep. An El Niño threatens the possibility of a good spring, which would place further pressure on the industry. Many producers have been supplementary feeding to help stock hold on, but feed stocks are low after poor hay cuts last spring. Sales of lamb and mutton have been at record highs as producers look to reduce stock numbers. Lamb prices are high and are expected to remain steady as supply tightens. Producers will be rewarded if they can achieve good carcass weights. The rise in wool prices provides an encouraging outlook for the industry.

Stephen Caswell - Elders, Tasmania

From the field

Weather

Rainfall outlook May-July 2015



Observed rainfall April-June 2015

Production

Mea

t pro

duct

ion

(‘000

tonn

es c

wt)

No.

of s

heep

(mill

ions

)


Data: ABS


Bal

es o

ffere

d (‘0

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ron


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UAE

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Jordan UAE Kuwait 2014 Export Share

TASMANIA JULY 2015

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2010 2011 2012 2013 2014 2015


Exports of mutton from Tasmania to Jordan, the United Arab Emirates and Kuwait increased substantially in 2014 and have continued to increase in 2015. Lamb exports have also increased slightly. After decreasing by 15% in 2014. Tasmanian wool exports have continued to fall in 2015.


kg C

WT

Price

Data: MLA

Valu

e of

exp

orts

($m

)

Data: GTIS

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e of

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orts

($m

)Data: GTIS

c/kg

cle

an


Data: AWEX



Trade lamb18-22kg

601 502 483 543 421

Mutton18-24kg

360 337 289 350 233


1207 1014 1077 1199 959

Fine wool - 17µ 1456 1223 1477 1664 1256

Medium wool - 20µ 1308 1129 1183 1329 1066

Broad wool - 26µ 1056 813 781 857 667

Trade lamb Mutton

Data: MLA, AWEX


21.221.421.621.822.022.222.422.622.8

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VICTORIA JULY 2015

Conditions for sheep production in Victoria have been mixed with eastern parts of the state receiving good rainfall, but drier than normal conditions persisting in the west. The recent trend of producers changing from wool breeds to dual-purpose sheep and prime lambs has continued, contributing to the increase in sheep meat production. Lamb and wool prices are expected to remain supported as current supply and demand conditions persist.

A late and varied break to the season and mention of an El Niño has impacted confidence. Nevertheless, recent rain and warm weather is cause for optimism. Increases in wool and lamb prices are encouraging farmers to return to the sheep industry in the Western District after decades of declining flock numbers. Prices should remain at least at current levels for the foreseeable future given low stock numbers, which will take years to rebuild. Farmers seeking to invest in livestock enterprises should concentrate on the industry they know best and consider opportunities for improvement such as comparing production efficiencies of different breeds and lines to improve performance such as lambing percentages and wool cut per hectare.

Ron Semmens - Rural Finance, Victoria

From the field

Weather




Production

Mea

t pro

duct

ion

(‘000

tonn

es c

wt)

No.

of s

heep

(mill

ions

)


Data: ABS


Bal

es o

ffere

d (‘0

00)



mic

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2012 2013 2014 2012 2013 2014 2012 2013 2014 USA China UAE

USA China UAE 2014 Export Share

VICTORIA JULY 2015

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2010 2011 2012 2013 2014 2015


Lamb and mutton exports from Victoria increased in 2014, particularly to the USA and China. Wool exports from Victoria decreased slightly in 2014 with less demand from China. Wool exports have increased in 2015 by 17% against the same time last year after renewed demand from China.


kg C

WT

Price

Data: MLA

Valu

e of

exp

orts

($m

)

Data: GTIS

Valu

e of

exp

orts

($m

)Data: GTIS

c/kg

cle

an


Data: AWEX



Trade lamb18-22kg

591 551 486 549 429

Mutton18-24kg

396 363 325 402 232


1207 1014 1077 1199 959

Fine wool - 17µ 1456 1223 1477 1664 1256

Medium wool - 20µ 1308 1129 1183 1329 1066

Broad wool - 26µ 1056 813 781 857 667

Trade lamb Mutton

Data: MLA, AWEX



19.319.419.519.619.719.819.920.020.120.2

360370380390400410420430440

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WESTERN AUSTRALIA JULY 2015

The northern pastoral zone of Western Australia has experienced a good first half of 2015. Favourable conditions and a good spring have resulted in high marking rates and good fleece and carcass weights. Good rainfall is forecast for the coming months, boosting the confidence of farmers. The lamb price is expected to increase with relatively low supply and demand continuing to grow.

A dry May and June saw additional selling in the grazing areas of Western Australia. Recent rains have improved the pasture outlook and reduced sales. There is a good supply of 2014 lambs in the market and opportunities exist to buy young wethers for grazing. Demand for sheep meat is very strong and farmers remaining in the industry are benefitting from improved returns.

Jeff Wootton - Elders, Western Australia

Wool production has increased but is forecast to fall slightly in the coming year. The wool market has been favourable with 10 year highs in the price of mid micron wool. The level of production suggests strong prices can be maintained. Demand for finished wool garments in China continues to be strong. Demand for fine wools in Italy has also improved.

Danny Burkett - Elders, Western Australia

From the field

Weather




Production

Mea

t pro

duct

ion

(‘000

tonn

es c

wt)

No.

of s

heep

(mill

ions

)


Data: ABS


Bal

es o

ffere

d (‘0

00)



mic

ron

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2010 2011 2012 2013 2014 2015500

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2012 2013 2014 2012 2013 2014 2012 2013 2014 China India CzechRepublic

China India Czech Republic 2014 Export Share

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Kuw

ait

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an

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a

Kuwait Jordan China 2014 Export Share

WESTERN AUSTRALIA JULY 2015



Mutton and live sheep exports from Western Australia increased in 2014 by 27% and 34% respectively while lamb exports increased by 7%. Wool exports from Western Australia are up 5% on last year are ending 2014 10% lower than the year before.


kg C

WT

Price

Data: MLA

Valu

e of

exp

orts

($m

)

Data: GTIS

Valu

e of

exp

orts

($m

)Data: GTIS

c/kg

cle

an

Western Wool Price Indicator

Data: AWEX



Trade lamb18-22kg

497 589 460 525 376

Mutton18-24kg

337 323 289 353 205

Western Indicator (wool)

1251 1065 1099 1200 988

Fine wool - 18µ 1352 1137 1384 1519 1188

Medium wool - 20µ 1312 1130 1183 1331 1071

Broad wool - 22µ 1258 1125 1126 1240 1021

Trade lamb Mutton

Data: MLA, AWEX


P 1300 660 115ruralbank.com.au

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The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Rural Bank and Rural Finance make no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Rural Bank and Rural Finance and are subject to change without notice. Rural Bank and Rural Finance has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. This report is provided for informational purposes only and should not be relied upon without consulting your legal and/or tax professional.

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For further information: E [email protected] P 1300 796 101

Authored by: Michael Curtis, Ag Achiever Jonathan Creese, Manager Ag Answers Matthew Ough, Ag Answers Senior Analyst

About Rural Bank and Rural FinanceRural Bank has been a wholly-owned subsidiary of Bendigo and Adelaide Bank Limited since 2010 and is the only Australian-owned and operated dedicated agribusiness bank in the country.

From 1 July 2014, Victorian agribusiness lender, Rural Finance joined Rural Bank as a division of Bendigo and Adelaide Bank Limited. As a specialist rural lender, Rural Finance has been fostering the sustainable economic growth of rural and regional Victoria for more than 65 years.

Together, Rural Bank and Rural Finance are supporting farmers and farming communities by providing them with specialist financial tools, industry insights and investment into the future of the Australian agribusiness sector.

Rural Bank’s specialist farm finance tools are available nationally via a network of banking partners, including Bendigo Bank and Community Bank® branches and Elders Rural Services.

About Ag AnswersAg Answers is a specialist insights division of Rural Bank and Rural Finance. Recognising that good information is the key to making good business decisions, Ag Answers provides research and analysis into commodities, farmland values, farm business performance and topical agricultural issues to enable farmers to make informed decisions. The National Sheep and Wool Update compiles information to present a state-by-state analysis of the Australian sheep and wool sectors.

Special acknowledgementAs livestock specialists, Elders Rural Services offers insight into local market conditions for the sheep and wool sectors. We thank Elders for their valuable contribution to this report by providing this commentary.

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Documents

NATIONAL SHEEP & WOOL UPDATE JULY 2015 · export demand, declining flock size and expectations of a shift to flock rebuilding are likely to keep sheep and lamb prices above . average