Higher incomes in China are providing more families there with greater opportunities to purchase meat which was normally too expensive for them. With a newly acquired taste for lamb, China is changing the dynamics of the global sheep meat market and is now the largest producer, consumer and importer of sheep in the world.
Global lamb and sheep meat exports are dominated by Australia and New Zealand which are the second and third largest producers worldwide. While Australia has experienced rapid growth in lamb exports in recent years New Zealand has been somewhat thwarted for long term growth due to high competition from its dairying and forestry sectors.
Some hard number crunching and extended international talks has resulted in a degree of liberalisation of lamb meat trading through Free Trade Agreements (FTAs). Using these FTAs, Australia and New Zealand are in the forefront of welcome Chinese import demand giving both countries somewhat of a competitive edge over other suppliers.
China is home to 187 million sheep and is the world’s largest flock while India with 75 million is second; Australia with 74.7 million is third; Sudan with 53.5 million is fourth and Iran with 48.7 million is in fifth place. The UK holds the largest sheep flock in the European Union as well as being the largest producer of lamb and mutton in the same region.
While the EU is the second largest importer of lamb, shipments to there have been falling since 2010 due to economic instability on top of falling consumption and production there.
Lamb and sheep production is vital to the UK economy but since it operates in an increasingly open global market where competition, free trade agreements and market access can influence its future, it is very volatile.
Plus, with Brexit looming and the current uncertainties of what market trading will be, the UK could either be facing a lamb export crisis or become a very strong player in non-EU markets.
Another key influencer in world lamb import markets is the Middle East/North Africa (MENA) where demand is also increasing as the tradition of eating sheep meat intensifies.
Future A number of uncertainties will influence the global trading of sheep meat in the future including changes in international trade agreements, the outlook for the global economy and exchange rates. Swings in consumer trends to another meat, possibly beef, in the future are also a challenge facing the sheep meat export industry as well. Long term sheep meat forecasts suggest there will be a tight supply situation for the key exporting countries, and also indicate Australia will experience further growth but New Zealand will not.
While the EU production of sheep meat is expected to remain stagnant, global demand is forecast to grow led by China which is set to be a major influence in the sector.
Looking to 2025 A report published by the Agriculture and Horticulture Development Board (AHDB) in the UK assesses the global situation of sheep meat production and demand. It also takes a look at the forecasts for sheep meat exports in the future to 2025 and what factors will influence the sector. The report highlighted that the success of any country’s export market for sheep meat in the future relies critically on government policy. As voters start swinging to far right parties, as experienced across the EU and beyond, a new party in power could change policy. The Trump administration in the United States is a key example of how a new leader can force major change in how a country trades with the rest of the world.
Religious tendencies will also influence the global production and trading in the future but to what extent is unclear. Focusing on New Zealand, there are a number of critical factors that will influence future production of sheep meat. This will herald from any impact of environmental legislation on the livestock sector, plus further competition from the dairy sector.
Over the ditch in Australia, it will be climatic conditions that will continue to play a part in production developments there as sadly witnessed in the current drought conditions across the country but more so in New South Wales. Global production and consumption of sheep meat are forecast to grow by just over one per cent per annum, which would be a slightly higher rate than historical developments. The growth in trade, led by increased availability of Australian lamb, is expected to be nearer two per cent per annum in line with the historical increase.
The ‘high’ scenario is one of sustained strong positive price and demand developments, plus a sustained move towards more free trade with global supply unable to keep pace with demand.
There will be long-term sustained lamb export growth for Australia, with strong consumption growth in China but with global import growth constrained by export availability.
The growth in global production and consumption is forecast to be nearer two per cent per annum with trade rising by over three per cent per annum. The ‘low’ scenario is the complete opposite of the high scenario with no increase in world prices and demand, increased protectionism and problems for exporting countries. In this case, there will be long term declines in production in Australia and New Zealand as they adjust to declining import markets, including China.
Main findings The AHDB report concluded that International policy will inevitably impact on trade flows. There could inevitably be a switch of supply for New Zealand lamb if it choose to divert produce from the EU to the increased demand and potentially higher prices from China over the next five years.
This in turn might free up the market in the EU somewhat boosting supply and prices there.
Chinese demand for cheaper cuts makes it another advantageous market to be a part of as it adds value to the lamb carcase on export. Further growth is expected to take place in MENA, especially the Gulf States, given consumer preferences but with oil price developments also continuing to influence demand. The United States will also remain an important market for prime lamb and there could be scope for a further rise in imports.
However, the main concern being how long the Chinese demand will continue to increase?
China could become more self-sufficient in sheep production therefore throwing the export trade to it into chaos and export countries forced to reduce stock levels.
