LAMB prices have risen 23 per cent in the 12 months to August 2010 due to strong export and restocker demand, according to the National Australia Bank (NAB).
NAB Agribusiness’s latest Rural Commodities Wrap, released today with sheep meat as the commodity in focus, provides an overview of key commodity prices and macroeconomic drivers.
Khan Horne, NAB Agribusiness General Manager, said favourable weather conditions have seen producers focus on flock rebuilding, reducing yarding and slaughter rates, but raising prices.
“The Heavy Lamb Indicator has risen 23 per cent since August 2009 and the tight supplies of sheep and lambs for slaughter are likely to keep saleyard prices high for producers through the remainder of 2010,” said Mr Horne.
“Adding a further boost to prices has been the consistent local demand combined with increasing export demand from the Middle East, China and South East Asia for lamb meat.
“On the export side, the economic outlook for key lamb markets is variable, with strong growth in China and Middle East, moderate growth in US and Japan and poor growth in Europe.
“Although the Australian flock may decline further in 2010, it’s stabilising with the high prices on offer, but it’s becoming apparent that the national sheep flock decline may be coming to an end,” he said.
Saleyard prices for mutton have also increased 43 per cent for the year to date as producers retain sheep to rebuild flocks.
The NAB Rural Commodity Index jumped 5.1 per cent in August in AUD terms, driven largely by a 20 per cent increase in the spot price for wheat.
Sugar, cotton, barley, lamb and beef also recorded price increases, partially offset by falls for dairy, wool and wine. With the improvement in key fundamentals, NAB has revised its expectations for the Rural Commodity Index for 2010-11 to 9 per cent, a significant upward revision on last month.
In other commodities, cotton prices have been rallying strongly over the past few weeks, reaching the key figure of 100 USc/lb, a level not seen for 15 years. The stronger Australian dollar has removed some of the lustre from this rally, with prices trading above AUD $500 per bale in the physical markets.
An ideal combination of strong global prices and a solid production outlook has seen the expectations for gross value of farm production to increase 12.8 per cent in 2010-11 to $46.6 billion.
The outlook for farming incomes has also picked up significantly, with NAB expecting the net value of farm production to increase by almost 50 per cent to $9.4 billion.