Rabobank sees a Covid-19 upside for the Australian sheep industry

Rabobank is predicting mixed fortunes for Australian sheep producers with lamb maintaining some strength but wool falling away at least until the end of the year.

Limited sheep numbers will support Australian farmgate prices through the Covid-19 disruption, however forecasts for the wool sector remain less bullish, according to agribusiness specialist Rabobank.

With a growing exposure to exports, and product positioning in the premium red meat category, the Australian lamb industry was more exposed to Covid-19’s global economic downturn than some other meats, but Australia’s record low domestic sheep numbers are seen as countering the global market impact.

Lamb slaughter numbers are down 12 per cent and sheep slaughter is 26 per cent down, year to date – an indication that producers are holding and rebuilding flocks now the season had turned.

A phenomenal 35 per cent jump in lamb prices early in the year probably won’t last given 65 per cent of lamb, and almost all mutton and wool, is exported around the globe and overseas markets are seeing significant drops in consumption.

Social restrictions have impacted foodservice and restaurant demand heavily, with foodservice traffic in China during the month of February down 80 per cent, although signs of recovery were now being seen.

A weaker Australia dollar will also aid overseas sales into a slower global market.

Things are not looking as good for wool given the contraction in markets but Rabobank sees prices staging a recovery late in the year or early 2021.

Particular note was made of the fact China had one of its lowest volumes of wool imports in the past 10 years last year so stocks there are expected to be low, possibly driving stronger imports as factories start to open up again.

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