Australia’s mutton industry is grappling with a significant oversupply, leading to a drastic decline in sheep prices. In response, some Australian farmers are opting to give away or cull their livestock to cut costs rather than raising them on-farm.
Data provided by Meat and Livestock Australia (MLA) reveals a staggering 70% slump in mutton prices over the past year, plummeting to $1.23 per kg. The surge in sheep numbers, reaching 78.75 million head, is attributed to three consecutive years of above-average rainfall in key sheep regions, including New South Wales and Victoria.
Farmers, initially encouraged by favorable weather conditions, opted to retain more sheep on-farm instead of sending them to slaughterhouses and markets. However, this decision has now backfired, with a massive fall in profitability and the potential destruction of animals due to a lack of market demand.
The oversupply issue is expected to persist, with Australia’s sheep flock projected to expand by 23% from the 100-year low in 2020. This surplus has triggered a reversal in fortune for farmers, who enjoyed record mutton prices just three years ago.
Compounding the problem, adverse weather conditions, including the driest September on record, are impacting feed supply. The Australian Bureau of Meteorology predicts a continuing El Nino and a strong positive Indian Ocean Dipole event, signaling hot and dry months ahead.
Farmers, faced with the challenge of feeding a large flock amid unfavorable weather, are attempting to reduce their livestock numbers. However, meat processing facilities are struggling to cope with the increased turnoff of sheep, exacerbated by labor shortages and a backlog of unprocessed stock from the previous year.
Despite Australia being the world’s leading producer and exporter of sheep meat, the oversupply has put downward pressure on global wholesale prices. Major supermarket chain Woolworths Group has announced a 20% cut in lamb product prices, but this retail discount has yet to be fully reflected in the market.
While Australia exported a record amount of sheep meat in October, there remains a significant backlog to clear. Consumers, both domestic and international, are likely to continue seeing dips in mutton prices. Some farmers are considering not mating their ewes to reduce costs, potentially leading to a rapid shift in the sheep market landscape from oversupply to undersupply.
A recent survey by the National Farmers Federation indicates that over 60% of Australian farmers do not feel more positive about the future of farming compared to a year ago.
