NORTH SYDNEY, Australia – Positive market conditions for the Australian sheepmeat industry are predicted to continue for the rest of 2011 and beyond. Supplies will increase but remain tight as the flock rebuilds more rapidly than expected, according to Meat & Livestock Australia’s mid-year sheep and lamb projections.

These projections were released on Aug. 11 by MLA Chief Economist Tim McRae to a sheep industry gathering in Cowra, central NSW. Historically high lamb prices seen earlier in 2011 were returning to a more sustainable level for the entire industry, he said.

"Lamb prices hit record-breaking highs in the first quarter of the year, due largely to rain-disrupted markets,” he added. “However, while remaining favorable on a historical basis, prices are now back to more sustainable levels that are viable for the entire supply chain.”

New season lambs entering the market combined with additional younger lambs still on hand will put some supply pressure on the market late in the year and into early 2012.

"Improved seasonal conditions have resulted in faster flock rebuilding across the eastern states than was forecast earlier in the year, with flock numbers revised upward to now reach 70.8 million head in 2011 – an increase of 4 percent,” McRae said. “Flock rebuilding is expected to continue over the next five years to reach 75 million head in 2015 [revised up from the previous forecast of 71 million] from the low of 68 million head in 2010. Intentions to rebuild have also been boosted by the recent improvement in wool returns – a positive for both meat and wool flocks over the next five years."

Western Australia is the exception to the rebuilding trend, with drought conditions throughout the first half of the year maintaining flock liquidation. However, recent falls have provided some long-awaited relief for southern WA producers, possibly signaling the start of a better season for 2011-12.

National lamb slaughter is expected to decline 3 percent on 2010 levels to 18 million head. However, higher average carcass weights in 2011 – up 2.8 percent on 2010 to average 22.2 kg – will result in only a small decrease in lamb production to 400,000 tonnes cwt.

In 2011, sheep slaughter is expected to bottom out at 4.8 million head.

Higher retail lamb prices, steady production and strong competition from export markets will contribute to a decline in the amount of lamb in the Australian market in 2011 – down 3 percent year-on-year, to 209,000 tonnes cwt. Growth in the Australian market over the next five years will also be more constrained than initially forecast, as volumes to overseas markets are anticipated to overtake the Australian market for the first time.

In 2011, lamb export volumes are forecast to increase by 2 percent, totaling 158,000 tonnes swt. Robust overseas markets are expected to continue to attract additional product, despite the strong A$, with growth over the coming years to be driven by the Middle East and China.