Global and European
Sheepmeat market update
1
Table of Contents
Executive Summary ...................................................................................................................................................3
Global Sheepmeat Production and Export Availability ..............................................................................................4
Recovery in lamb exports ..................................................................................................................................4
New Zealand ..............................................................................................................................................................4
Lamb production stabilizing ...............................................................................................................................4
Exports to EU under pressure ............................................................................................................................5
Australia .....................................................................................................................................................................6
Lamb supply recovery ........................................................................................................................................6
EU Sheepmeat Market Developments ......................................................................................................................7
Production more stable .....................................................................................................................................7
Imports in sharp decline ....................................................................................................................................7
United Kingdom .........................................................................................................................................................8
Inclement weather conditions affecting lamb production ................................................................................8
Availability of supplies dictating lower exports .................................................................................................8
France ........................................................................................................................................................................9
Production in decline .........................................................................................................................................9
Imports also falling.............................................................................................................................................9
Spain ........................................................................................................................................................................10
Flock shrinking .................................................................................................................................................10
Consumption declining ....................................................................................................................................10
Ireland ......................................................................................................................................................................11
Continued Growth within Irish Sheep Sector ..................................................................................................11
2
Executive Summary
 Global lamb export availability amongst the main global producers showing signs of recovery after
supplies shrunk by over 1% in 2011.
 As European demand remains sluggish, more product from the Southern hemisphere is being
diverted into emerging markets. The Greater Chinese market now takes 25% (12% in 2008) of New
Zealand product and 19% (13% in 2008) of Australian product.
 New Zealand lamb supplies to increase by 6% in the 2012/13 marketing season.
 The NZ dollar has appreciated 10% against the Euro to date this year. This has affected the
competitiveness of New Zealand product into European markets during 2012. As a result, their EU
quota is expected to be significantly underutilised.
 The Australian sheep flock grew by 3% to 75 million head during 2012, this pattern of flock
replenishment is expected to continue, which will boost lamb availability.
 European sheepmeat output has begun to settle down, following years of decline.
 Shipments of lamb into Europe have fallen by 22% during the first eight months of 2012, due to
tighter NZ supplies coupled with unfavourable exchange rate movement for key Southern
Hemisphere exporters.
 The UK is one of the few European countries in a position to increase output during 2013, as
producers continue to rebuild breeding flocks in response to better producer prices.
 Exchange rate movement that includes sterling and dollar (NZ & OZ) will underpin future trade
developments.
 In contrast, French production is likely to fall during 2013, reflecting the impact that the drought
had on the breeding flock towards the end of 2011 and into 2012.
 Lower French consumption is likely to have some negative impact on import demand in the short
term.
 Spanish lamb supplies being affected by some flock liquidation. In the November 2011 census, the
breeding flock fell by 8%. This is leading to some increase in exports volume availability.
 Tighter New Zealand supplies contributing to lower consumption levels across Europe.
 Irish sheep prices considerably higher than 2009 and 2010 prices. For the first 10 months of 2012,
lamb prices are 25% and 8% stronger than 2009 and 2010 levels respectively at €4.72/kg.
 Renewed confidence in the Irish sheep sector has led to a strong increase in supplies in 2012. Some
further increase in supplies anticipated in 2013 on the back of some increase in breeding flock
numbers.
3
Global Sheepmeat Production and Export Availability
Recovery in lamb exports
A recovery in lamb output amongst the key global exporters is expected to materialise during 2012, as
seen in the below table. This recovery is expected to be maintained into 2013, which should help boost
export availability. However, export availability from New Zealand in 2012/13 will still be 22,000
tonnes below 2009 levels. Most of the increase in export availability over the past few years has been
evident in Australia, with most of this increase channelled towards emerging markets in Asia.
Trends in major global lamb exporters
2009
2010
2011
2012(f)
2013(p)
Production (000 tonnes cwe.)
New Zealand (1)
Australia
United Kingdom (2)
Total
399
424
303
1,126
375
402
281
1,058
356
399
289
1,044
357
429
276
1,062
372
434
293
1,099
Exports (000 tonnes prod. wt)
New Zealand (1)
Australia
United Kingdom (2)
Total
305
165
98
568
295
156
92
543
266
160
102
528
265
178
98
541
276
183
109
568
Source: Bord Bia
(1) Year ended September
(2) Including mutton
New Zealand Monthly Export Lamb Supplies, '000 head
New Zealand
Lamb production
stabilizing
4,000
3,500
3,000
2,500
2,000
After a period of drought
1,500
combined with better
1,000
producer
prices,
New
500
Zealand lamb production
0
has begun to settle down.
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
After declining by 5% in
2005/06-9/10 ann av 2010/11 2011/12
2010/2011, higher carcase
weights during the 2011/12 season helped offset lower supplies especially in the last quarter, with
output virtually unchanged at 357,000 tonnes. Lamb supplies for the year fell by almost 2% to 19.4
million head. Within this, export lamb supplies fell by more than 2% to 19 million head.
4
Some recovery is assumed in lamb production in 2012/13. This is on the back of some lift in breeding
ewe numbers coupled with the expectation that lambing rates are expected to return to 2009-10
levels. In addition, there was a significant slowdown in ewe supplies during 2011/12, with output being
23% lower at 3.2 million
New Zealand Chilled Lamb Exports to EU, tonnes
head. These factors are
expected to increase
lamb supplies by over
6% to 20.5 million head.
12,000
10,000
8,000
Looking slightly further
6,000
ahead, the weaker lamb
4,000
market in recent months
2,000
has meant that producer
0
optimism has been
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
eroded
somewhat,
2009/10
2010/11
2011/12
which may lead to lower
ewe hogget retentions in the short to medium term.
Exports to EU under pressure
The NZ export trade is being affected by weak EU demand, which led to more product being diverted
into emerging markets. For the year ended September 2012, lamb exports eased slightly to 265,000
tonnes. Some increase is forecast during 2012/13, in response to increased output.
Chilled lamb shipments to the EU for the 2011/12 marketing season were down 8% year on year. The
average price in euro was up 4%, despite being below year earlier levels from June.
In the calendar year 2011, New Zealand only utilised 80% of its EU quota, the lowest figure for many
years, as recently as 2009 it was 98%. The figure seems set to fall further in 2012 as shipments to the
EU were down 13% in the first nine months. However, total exports are back by just 1% during the
same period. China has overtaken the UK as the number one destination for NZ product, with trade
51% higher compared to year earlier levels. For the remainder of the year, lamb exports are expected
to show recovery.
Distribution of NZ exports
Destination
EU-27
Greater China*
North America
Other
2008
2012(f)
45%
12%
13%
30%
38%
25%
9%
28%
*Includes China, Hong Kong, Taiwan.
5
Australia
Lamb supply recovery
A strong recovery in Australian lamb
production is anticipated by Meat and
Livestock Australia on the back of some
flock rebuilding that has taken place in
response to good producer prices
throughout 2011.
In June 2012, the Australian sheep flock
was 3% higher than a year earlier at 75
million. Over the next four years, some
further consolidation of the sheep flock is expected to occur, with the flock forecast to reach 80 million
head by 2016. However, it will still remain
well below the 100 million head recorded
in the 1990’s.
As a result of increased numbers,
Australian lamb production is set to
recover by almost 8% in 2012 to 429,000
tonnes cwe driven by a 9% rise in lamb
supplies to 19.5 million head. The strength
of feed prices is expected to reduce
average carcase weights somewhat. Also,
producers are responding to customer
preference for mid-weight lambs with
forecasts for the year expecting carcase weights to average 22.5kg, down 4% on 2011 levels.
Australian lamb exports are expected to increase by almost 12% to 215,000 tonnes during 2012 due to
increased output combined with some increase in imports. The key markets are North America,
Middle East and China, with virtually the entire increase in exports this year expected to materialise in
the latter two markets. Exports to Europe are expected to fall by 15%.
Distribution of Australian lamb exports
Destination
2008
2012 (f)
North America
30%
23%
Middle East
17%
25%
Greater China*
13%
19%
4%
5%
36%
28%
South East Asia**
Other
*Includes China, Hong Kong and Taiwan.
**Includes Indonesia, Singapore, Philippines, Malaysia, Thailand and Vietnam
6
EU Sheepmeat Market Developments
Production more stable
Sheepmeat output has stabilized in the EU since 2010 on the back of a general improvement in
optimism within the sector. Some slight fall in output is anticipated next year, reflecting the lingering
impact of drought from 2011, and the on-going growth of live exports to international markets.
Imports in sharp decline
Total sheepmeat imports were down 8% in 2011, and there has been another marked fall of 22% in
the first eight months of 2012 due to some dampening in demand coupled with a weak euro. The New
Zealand dollar so far this year (Jan-30th Oct) has appreciated 10% against the euro and this contributed
to the 6% year on year rise in the average EU import price in the first eight months of 2012.
European imports for the first eight months of 2012 show a severe decline for the top six suppliers.
Shipments from New Zealand (which has a market share of 87%) are down 19% and Australia down
28%. Frozen imports were severely impacted, with imports back by 30%, as sluggish demand from the
food service industry across Europe continues to affect this trade. However, chilled demand has held
up reasonably well considering the economic backdrop, albeit imports are still 6% lower this year.
EU-27 Sheepmeat balance sheet
2009
2010
2011
2012(f)
2013(p)
Net production (000 tonnes cwe)
948
922
930
925
915
Meat imports (000 tonness cwe)
271
239
221
178
160
Meat exports (000 tonnes cwe)
8
13
16
21
24
Consumption (000 tonnes cwe)
1,212
1,148
1,135
1,082
1,051
2.4
2.3
2.3
2.1
2.1
412
436
499
- Per capita
EU-12, weighted heavy lamb price
cent/kg
Source: Bord Bia based on European Commission estimates
The EU trade looks likely to be finely balanced next year with ongoing sluggish consumption levels
being offset by persisting tight European supplies. Given this scenario, the level of New Zealand
sheepmeat available on the market will have a major influence on trade. Europe has become a less
attractive destination for New Zealand lamb due to the strengthening New Zealand dollar against the
Euro combined with growing demand from emerging markets, especially China.
7
The reduction in imports has inevitably reduced availability of supplies. European consumption
continues to decline steadily as consumers switch to other meats. Compared with 2008, the market by
2013 will have shrunk by 18%.
European Prices
The weighted EU-12 heavy
lamb price shows that prices
are 3% higher at €5.07/kg to
date this year (Jan-Oct 22nd)
on the corresponding period
last year reflecting the impact
of a significant tightening in
supplies.
EU-12, weighted heavy sheepmeat price, c/kg excl VAT
650
600
550
500
450
400
350
Jan
Feb
Mar
United Kingdom
Apr
May
2012
Jun
Jul
Aug
Sep
Oct
2011
Inclement weather
conditions affecting lamb production
Lamb production increased during 2011, reflecting excellent lambing rates during spring 2011
combined with the breeding flock increasing in December 2011.
Output is expected to fall by almost 5% to 276,000 tonnes in 2012, reflecting the disruption to finishing
lambs in 2012 due to difficult weather conditions this summer. As a consequence, more lambs are
expected to be finished in the 1st half of 2013.
Looking ahead to 2013, it would appear that the UK is one of the few European countries that are in a
position to increase output. On the back of some flock rebuilding, production in the UK is set to
increase by over 6% 293,000 tonnes.
Availability of supplies dictating lower exports
Export demand increased by 11% during 2011, exports were helped by the pound weakening the Euro
coupled with export availability from New Zealand tightening.
In 2012, export demand has eased due in part to the pound appreciating against the Euro, and some
decline in consumption being evident around Europe.
Exports in product weight were up 3% in January-June 2012 due to increased shipments to non-EU
markets doubling. In contrast, exports to EU markets were down 3%, including a 5% fall to France
which accounted for 60% of UK trade. Export availability will decline during the autumn given the
expected production developments.
Looking ahead to 2013, exports will be influenced by the exchange rate movement, availability of
supplies and economic growth in the EU.
8
UK Sheepmeat Export Availability
Breeding Flock* (000 head)
Net production (000 tonnes cwe)
Meat exports (000 tonnes cwe)
2009
2010
2011
2012(f)
2013(p)
14,027
13,842
13,860
14,800
15,000
303
281
289
276
293
98
92
102
98
109
*December previous year
Source: AHDB, Bord Bia
France
Production in decline
Sheepmeat output rebounded by 4% to 113,000 tonnes in 2011 on a back of a recovery in breeding
flock numbers.
For 2012, output is expected to decline by over 2% to 110,000 tonnes in response to some culling
within the breeding flock following the drought which prevailed across the country during late 2011
and into 2012. Ewe supplies fell by 6% during the first half of 2012, however this pattern is not
expected to continue for the remainder of the year, with breeding ewe numbers expected to fall by 2%
to 6.1 million head this December.
Output is likely to fall to around 108,000 tonnes in 2013, on the back of some slight decline in the
breeding flock.
Imports also falling
Sheepmeat imports for the first eight months of 2012 were down by 4% to 70,000 tonnes. Irish
shipments were more than 12% higher during the same period, which is equivalent to 18% of the total
French market. In contrast, UK shipments have fallen by 12%, however the UK still control about 42%
of the total market. Shipments from Spain rose by 21% (with its market share up to 12%) given the
weakness evident in domestic demand.
Shipments from New Zealand fell by 25%, as imports of frozen product fell by 36%. The fact that the
French average import price was down 1% to €5,154 per tonne in the first half of 2012 after being up
11% in 2011 suggests some weakening in demand.
Some further decline in imports is forecast for 2013, as the French economic situation is expected to
remain difficult.
9
Consumption in decline
Consumer panel data indicates that household purchases were up almost 2% up to July 2012, with a
similar rise in expenditure, but demand has fallen away after a good Easter. The foodservice sector is
under greater pressure as consumers decide to eat out less frequently.
French Sheepmeat Balance Sheet
2009
2010
2011
2012(f)
2013(p)
Breeding Flock* (000 head)
5,888
5,769
6,087
5,835
5,750
Net production (000 tonnes cwe)
107.8
108.7
112.7
110
108
Meat imports (000 tonnes cwe)
134.7
121.4
112.2
107
105
Consumption (000 tonnes cwe)
232.3
218.5
214.1
207
204
* December previous year; figure for December 2010 inconsistent with previous years
Source: Bord Bia, Agreste, AgriMer
Spain
Flock shrinking
The November 2011 census indicated that both total sheep numbers and the breeding flock were
down 8% year on year, but production in the first half of 2012 was only 2% lower, which suggests that
further de-stocking has taken place.
Consumption declining
There has been a sharp fall in domestic consumption in the first half of 2012 with household purchases
down 8%.
Exports rising
This in turn has resulted in higher exports. During the January-July 2012 period, exports were 9%
higher year on year. Prices over the same period were down 8%, after rising by 12% in the year 2011.
There has been growth in trade with its three largest markets, France, Italy and the United Kingdom.
Such developments seem likely to continue.
10
Ireland
Market demand has been evenly matched with supplies, particularly during the peak periods of hogget
and new season lamb supply. When compared to the highs of 2011, this year’s average price of
€4.72/kg is marginally back on last year. However, in an overall context, Irish sheep prices have
performed consistently well throughout 2012 and are well above 2009 and 2010 prices.
Irish Sheep Prices YTD 2009-2012, cent/kg.
Supplies
For the second successive year, the national sheep flock showed an increase in numbers, with the CSO
reporting that the flock rose by almost 7% to 5.15 million head in June 2012. In line with the renewed
confidence in the sector,
the
breeding
flock
increased by almost 6%
to 2.65 million head.
Continued Growth
within Irish Sheep
Sector
Sheep supplies for the
year to date are up 10%
to 1.96 million head.
Much of this gain was
achieved in the first four
months of the year, when hogget supplies peaked at 330,000 head, equivalent to a 25% increase
compared to a year earlier.
11
The reduction in the
number of ewes and
rams supplies reflects
the growing confidence
in the sector, as efforts
continue to focus on the
rebuilding
of
the
breeding flock. Total
lamb supplies up to the
end of October were 8%
higher at 1.38 million
head. The vast majority
of this increase in lamb
throughput
occurred
from mid July onwards when the weekly kill exceeded 55,000 head, well above previous years.
Irish sheepmeat exports are expected to grow by almost 2% during 2012 to 37,000 tonnes. This
reflects some increase in domestic supplies. However, export availability has been curtailed by
increased domestic consumption levels combined with lower meat imports, especially from the UK.
Looking ahead to next year, the outlook points to an increase of between 3 to 4% in availability of
domestic supplies, given the expansion of the breeding flock that has taken place. However, lambing
rates may come under some pressure as some reports suggest that the condition of breeding ewes has
been affected by adverse weather conditions combined with poorer forage quality and availability.
12