LIMITED supply and robust demand have underpinned extreme high sheep and lamb prices in Western Australia, with a miraculous seasonal turnaround initiating a flock rebuild.
As of July 20, mutton prices were sitting at 619 cents per kilogram carcase weight (cwt), which was 0.6 per cent off the 624c/kg cwt record set last March when the rain broke.
Meat & Livestock Australia (MLA) market information manager Stephen Bignell said despite falling back recently, the mutton market had remained high Australia-wide and particularly in WA.
"It is sitting at 680c/kg cwt at a national level and the record is 720c/kg cwt," Mr Bignell said.
"In WA, prices are sitting closer to the local record of 619c/kg cwt and haven't come off as much, I think part of that is to do with the bumper year.
"The rebuild sentiment is definitely there in mutton and obviously, given where the wool market is there's that rebuild, but also the Merino element too."
Mr Bignell said compared to last year, there was "still a buck to be made" with high prices across the board in the sheep industry.
He said many categories had hit the winter seasonal peak, but prices in the lamb market had plateaued.
"Nationally, we have seen the seasonal peak come off for Merino lambs," he said.
"They reached 812c/kg cwt on July 1 and are now sitting at around 770c/kg cwt.
"It is largely the same in WA - they reached 827c/kg cwt earlier in the year and are now down to 756c/kg cwt.
"That's the seasonal trend we have seen."
Mr Bignell said WA Merino lamb prices were higher than national prices this year, due to increased demand.
He said in particular there had been a huge surge in restocker Merino lamb prices in WA earlier this year, which had since dropped.
"There was a huge surge in restocker lamb prices around March 9, when they hit nearly 900c/kg at 899c/kg cwt," Mr Bignell said.
"They have fallen again - since the winter peak this year - and are back down to 695c/kg cwt.
"On June 29, 2021, they were 807c/kg cwt, so apart from that March spike, late June was their high."
Mr Bignell said figures showed a real restocker sentiment in WA this year, when they hit a huge record of $8.98 in the first week of March.
He said previously it hadn't even hit 800c/kg cwt, having reached a peak of 753c/kg cwt on July 6, 2020.
In terms of the international markets, demand from China has remained extremely strong over the past 12 months, particularly for mutton.
That has been driven by the African swine fever issue that is creating a shortage of protein, as well as the avian influenza.
Mr Bignell said China made up 40pc of the Australian mutton export year-to-date and was up 30pc on last year.
Meanwhile, lamb to China was down 7pc with a larger market for chilled lamb heading into the United States.
"The US is taking 17pc more lamb year-to-date, but on mutton the US has taken 26pc less," Mr Bignell said.
"For WA exports year-to-date we have 7371t of mutton (down 22pc) and 12,673t of lamb (down 70pc).
"China is up 56pc on WA sheepmeat exports, taking 7797t (an extra 2802t compared to last year) in both mutton and lamb.
"I think while the 34pc increase in exports to China may not be driving the high mutton price, it is certainly underpinning it."
In other export markets, Canada has increased 40pc, Bahrain was up 660pc (but only made up two per cent of the WA market) and Japan was up 158pc (making up only one per cent of the market).
"One thing for WA in the mutton market is securing the Saudi access for live export," Mr Bignell said.
"We haven't seen any sheep, but are obviously still in that moratorium period.
"That's a huge win for the WA sheep industry and for mutton ewes and wethers."
The MLA 2021 sheep industry projections half-year update, predicted Australia's sheep flock would grow by 6.3pc.
Favourable seasonal conditions in the first half of the year, coupled with a positive outlook has been the driving force behind the faster national rebuild.
The flock dropped to 64 million head last year, off the back of years of drought and - in the rebuild - is estimated to reach 68.1m head.
That is an upwards revision of 700,000 sheep on MLA's February projections with improved conditions likely to impact producer intentions across WA.
Statistics provided by the Department of Primary Industries and Regional Development (DPIRD) stated that a total of 461,000 sheep were transferred to the Eastern States from January 1 to June 30, 2021.
A DPIRD spokesperson said that number was made up of 204,000 adult sheep (44pc) and 257,000 lambs (56pc).
This is a 54pc decline on last year, when a record breaking 1.9m head of sheep (including mated ewes) were trucked across to the Eastern States.
"The reduction in exports is due to several factors, which may include the high numbers sent to the Eastern States over the past 18 months, combined with the high level of sheep slaughter in 2020," the DPIRD spokesperson said.
"Not only has this increased competition in the marketplace and diverted a lot of sheep that may have come into local processors to the east, it has also led to very tight sheep supply in a declining sheep flock.
"Seasonally 2021 has been very strong in WA with good rainfall and pasture growth, which may be encouraging producers to retain sheep."
Between January and May this year, WA had exported a total of 30.1m/kg (cwt) worth $216m.
That was down 15pc year-on year in quantity terms and 19pc in value terms from 35.2m/kg (cwt) and $266.3m.
The decline in sheep meat exports is due to a decline in mutton exports from 18.2m/kg to 13m/kg.
Meanwhile, lamb has remained relatively steady at 17.1m/kg.
In value terms, mutton exports have reached $80.5m, down 29pc, compared to $112.6m at the same time last year.
However, this is still the second highest on record.
Lamb exports were valued at $135.6m compared to $153.7m last year (January to May).
Elders State livestock and wool manager Dean Hubbard said mutton was at an all-time high and he predicted it would remain strong for some time.
He said the lamb market was also very solid and marking rates anecdotally appeared to be "well up" on the previous year.
"Our livestock agents went out to draft lambs in October to December and were probably getting one in five lambs that were ready to go," Mr Hubbard said.
"As a result, processors were under supply pressure but this year I think it may well be the other way around.
"I think our agents will commence drafting over the upcoming spring season and may get four out of five lambs that are ready to deliver to WA processors."
Mr Hubbard said the market had been heavily influenced over the past year by the Eastern States.
He said during this period WA numbers processed and live export numbers were marginally down, while the Eastern States' sheep numbers remained high.
"The combined sale numbers out of WA are marginally down on previous years," Mr Hubbard said.
"In terms of supply, this may indicate we probably over sold slightly.
"But that is nowhere near to the extent some would have believed."
Mr Hubbard said it was the best season the industry had experienced in many years.
"You would have to ask - with people that are planning to get into sheep or cattle - where is their entry point going to be?" he said.
"Well sheep wise the entry point is probably going to be mature ewes, which will put pressure on that mature market for some period.
"I think we can certainly see the mutton market remaining quite robust for some time."
Mr Hubbard said there could be room for the prices to ease in the late spring lamb, which was the normal.
But where it eased too was too hard to quantify.
"I would expect this side of Christmas we would see quite a number of lambs available for the processors," he said.
Meanwhile, Nutrien Livestock WA stud and commercial sheep manager Tom Bowen also said the mutton market had been strong with demand from processors.
He said the demand was strong worldwide and it could remain that way for at least the short-term.
"At this time of year, anyone who has carried any finish lamb through to 12 to 14 months of age, is getting rewarded with good prices," Mr Bowen said.
"The store market has slipped because there's a lot of graziers and/or feedlotters unwilling to take a punt on old season lambs due to dentition and new season lambs being forwarded earlier this year.
"I think the high prices have brought sheep onto the market and didn't encourage people to hang in there."
Mr Bowen said some of the growers did their sums, worked out the comparisons and realised it was time to take advantage of the good prices.
He said they did that for two reasons: the price and seasonal conditions.
"Water was the biggest factor that was causing headaches,'' he said.
"In the past six weeks that headache has been relieved throughout the State I would say.
"That has been the biggest thing - the season changing and the shortage of water being resolved."
Mr Bowen said the seasonal turnaround would give growers the opportunity to retain breeding ewes for future years,
"It is a bit too early to comment on future demand," he said.
"That is because the buyers of replacement ewes have not offloaded their old girls or any of the new season's lambs to make space for the buy in ewes.
"And that will not happen until mid to late September."
Nutrien has eight annual spring sheep sales booked this year, which have most repeat vendors.
Mr Bowen said they were confident the sales, backed with Auction Plus or interface with Auction Plus, would give local buyers the opportunity to restock.
He said prices would be underpinned by the "very strong" mutton market.
"I would suggest you would be looking at a minimum average of about $200, to buy in replacement ewes this coming spring," Mr Bowen said.
