MUTTON exports to Saudi Arabia increased 57pc in October to 1366 tonnes.
Meat and Livestock Australia (MLA) Middle East market analyst Garry McAlister said over the next couple of months demand for mutton would remain strong with the long term outlook remaining to be seen.
He said over the past 12 months increasing oil prices had led to greater spending in Saudi Arabia and increased demand for mutton.
The rise in mutton shipments was largely the result of increased Australian supplies due to strong seasonal turn-off combined with higher prices for competitor products in the market, namely Brazilian frozen whole chickens and beef.
Cost and freight prices for Brazilian chicken increased by 60pc during 2005 to about US$1430/t.
The average price of Brazilian beef exported to Saudi Arabia increased by 15pc during 2005 to US$2005/t.
Mr McAlister said tightened supply of New Zealand lamb and mutton also had resulted in greater demand for Australian sheep meat.
He said over the short term the resumption of live sheep exports to Saudi Arabia had put pressure on mutton prices, especially in WA.
Mr McAlister said the two products did not compete in Saudi Arabia but there was a slight overlap in demand.
Chilled mutton demand had increased due to increasing concerns over bird flu.
Mr McAlister said major retailers had reported a 20pc decline in the sale of domestic and imported chicken.
Consumers' shift away from poultry combined with concern over foot and mouth disease in South American beef was providing a positive position for Australian mutton, he said.
The increased supply of Australian mutton has meant exports to Saudi Arabia for the 10 months to October increased 14pc on the same period last year to 18,287t sw.
Historically, Australian mutton exports to Saudi Arabia increase in the lead up to Hajj, the Muslim pilgrimage in January.
If Brazilian beef prices remain high during the remainder of 2005, Australian mutton will become more price competitive in the market, resulting in a likely further increase in exports to Saudi Arabia and the Middle East.
"The retail scene is changing in the Middle East," Mr McAlister said.
"MLA wants to make sure Australia is in a position to fit into this market."
Mr McAlister said the European hypermarkets Geant and Carrefour were expanding in Saudi Arabia and had resulted in increased demand for chilled meat products.
He said increasing hypermarket presence in Saudi Arabia had resulted in other local supermarkets such as Othaim and Tamimi changing their retail layout and demanding more chilled meat products.
Mr McAlister said other Middle Eastern countries were showing increased demand for mutton.
He said Jordan was demanding more chilled lamb and the United Arab Emirates had seen an increase in mutton consumption.
Mr McAlister said Australia was in the peak period of demand for mutton in Saudi Arabia but there was year-round demand for chilled mutton.