WELLINGTON, NEW ZEALAND — Although the Australian lamb industry’s high sale-yard prices, resilient supplies and strong export demand in the first half of 2009 are forecast to continue, this performance has been marred by a further substantial fall in the national flock, restraining potential growth in lamb supplies and affecting Australia’s ability to capitalize on the growing global demand for mutton and live sheep, according to Meat & Livestock Australia’s 2009 Sheep Industry Projections — Mid-Year Update.

This year’s exceptional lamb and sheep prices are the result of strong export and domestic demand, tighter supplies from New Zealand and a lower Australian dollar.

Lamb producers have generally enjoyed improvements to their bottom line over the past year with higher sale prices and lower costs, said Kara Jones, M.L.A. sheepmeat analyst.

Although strong demand has been welcome, exporters and processors have discovered the escalating lamb and sheep prices, reduced sheep turnoff, weak skin prices and climbing Australian dollar — though still lower than a year ago — challenging.

"Demand has been so strong that higher lamb supplies and a global recession have failed to prevent record sale-yard prices," Ms. Jones said. "M.L.A. anticipates demand will remain resilient — both on the export front and in the domestic market — with the normal spring decline affecting sale-yard lamb prices, but overall remaining high through 2010. Lamb exports are expected to rise nearly 6% this year, to 160,000 tonnes swt, with increases to most key markets."

The Middle East has been a standout so far this year, with exports in 2009 forecast to increase by 36%, to 34,500 tonnes, despite the impact of the global financial crisis and the economic slowdown on oil revenue and the region’s tourism and industrial sectors, Ms Jones added.

"The resilience of demand for lamb in the domestic market has been outstanding this year — so much so that M.L.A. has altered its January forecast and is predicting that domestic lamb consumption will increase this year by 1.7% to 238,000 tonnes cwt," Ms Jones continued.

Lamb production is predicted to reach around 482,000 tonnes by 2013, 16% higher than 2008. "This modest expansion in supply is expected to be met by a growing hunger for lamb in export markets and domestically, especially in Muslim and Hispanic communities," Ms Jones said.

The decline of the national sheep flock, however, which fell another 7% in 2008-09 to 72 million head — the lowest level since 1916 — gives real cause for concern, she said. The flock reduction means Australia may not be able to satisfy the demand for both mutton and live sheep exports, Ms. Jones added, and there is a risk lamb production could be reduced in future.

Australian mutton exports are forecast to decline 17% in 2009 and another 13% in 2010, to 186,000 tonnes swt — the lowest level since 1983. Similarly, live exports are expected to fall by 10% and 13% in 2010, to 3.3 million head, also the lowest since the 1980s.