AUSTRALIAN LAMB SALES ARE BOOMING
Australian lamb sales are booming…
Meat & Livestock Australia (MLA) reports that domestic lamb consumption is increasing. It is on the back of lower prices to producers and exports which are helping to set new records. The record sales are on year-on-year levels. According to MLA shoppers are increasingly buying more red meat. Thus far, the key reason is that retail prices push back against the inflation trend as normally seen at retail outlets.
Declining prices
In fact, livestock prices for cattle and sheep have been coming down throughout this year. This trend is following historic highs in 2022. Although livestock prices decreasing, the reduction in the average retail price of red meat lags behind prices that are paid to producers. There is about eight months lag time on price reflection. This is simply because of the amount of supply available. Demand for Australian red meat in export markets is another cause. The rising input costs through the value chain inflates prices too.
Demand and retail prices
Demand for Australian lamb and beef in the domestic market remains strong. So, both meats are growing in sales volume and overall value. Compared with the last quarter in the same period last year, the growth for beef is 1.8 percent. Lamb sales grew by 4.2 percent. Neilson data shows a 7.3 percent price reduction for lamb in comparison to a year ago. Thus far, it supports a 12.4 percent increase in the volume of lamb sales. So, lamb has seen a boom in purchases in recent months. Consumers are noticing the price is falling. Hence, they jump on the opportunity to buy a high-quality and nutritious protein.
Consumer benefits
The falling price is translating to increased consumption. Consumers purchasing frequency are increasing for various cuts. This is particularly the case for popular cuts like lamb chops and legs. Sales for these cuts are up 20 percent. As a result of price reductions consumers are buying more.
Livestock and retail prices
Historically relationship between price and consumer demand shows that it takes about eight months to flow on. In fact, it takes this long for livestock prices to reflect on the retail outlets. So, the last time in recent times that beef price reduction was in 2012. Hence, the lag to the shelf arrived eight months later. Those lower prices remain for about nine months. For lamb, which has seen a drop in price in the fourth quarter of every calendar year since 2018. The most significant price drops were in 2012-13 and 2016-2018.
There are a variety of factors that drive prices in the retail market. Currently, there are additional supply chain pressures. For example, livestock prices are only one component of retail meat prices. To produce meat for retail it requires investment in energy costs, transport, and freight costs. Furthermore, it requires labour costs, packaging, and disposal costs.
Other price effects
Other factors affecting prices are processor margins, retail margins, PPE, and hygiene. All of which have increased in price over the years. It is important to remember when considering prices. In fact, livestock prices increased as they did to historical highs last year. Thus far, when sale yard prices were high a year ago, retail prices increased too. However not at the same rates. So, we are seeing the same trend now, however, is in the opposite direction.
Consumers require a degree of certainty. So, retailers smooth the retail pricing impact over the longer term. It minimises a sharp increase or decreases in the price of meat in accordance with livestock prices.
Record lamb exports
Lamb exports grew 21 percent to 31,770 tonnes. It is year-on-year growth and the highest on record. Beef exports grew by 11 percent to 102,350 tonnes and mutton exports rose by 29 percent to 15,850 tonnes. China is the largest market for Australian red meat exports. It was 37,525 tonnes in August 2023.
Beef exports have been at their highest since 2019. So far, goat exports have risen by 22 percent to 2,855 tonnes. It has been the strongest August since 2014. Lamb exports to the United States eased a little. However, it remains the second-largest lamb export market. There has been a substantial growth in exports to the UK. It rose 174 percent to 1,045 tonnes. It is a relatively small market; however, a substantial increase suggests that exporters are taking advantage of opportunities. It is perhaps the result of the Australia-UK Free Trade Agreement.
