A shift in focus to cattle in NZ provides an opportunity for Australian sheep producers.
BEEF and Lamb New Zealand (BLNZ) has updated its livestock industry figures for the 2021 season, and they show the Kiwis have maintained their preference for cattle over sheep.
Sheep flock numbers declined by about 0.8 per cent from 2020 to 2021 to put the national flock at 25.8 million head.
In contrast, beef and dairy cattle are posting annual gains.
New Zealand’s beef cattle herd grew by 2.5 per cent during 2021 to reach nearly 4 million head.
The beef cattle herd has been on an upward trajectory since 2015, and the 2021 herd was the largest in more than a decade.
The dairy sector is also demonstrating some marginal growth with numbers up 0.2 per cent to 6.2 million head.
The NZ dairy herd grew significantly from 2005 to 2015: from 5.1 million head to peak at around 6.7 million head in 2014.
Dairy numbers softened between 2017 to 2019, but in recent years the herd has stabilised.
A breakdown of sheep and lamb categories within NZ highlights that while total sheep numbers remain in decline this year, lamb numbers have grown marginally.
Total sheep numbers have eased 0.8 per cent and breeding ewe numbers have followed suit, with a 0.5 per cent decline from 16.6 million head in 2020 to 16.5 million head last year.
This is the lowest annual decline in breeding ewe numbers since 2012.
During the past decade, the average annual decline in breeding ewes in NZ has been 2.7 per cent, so the momentum of the ever-shrinking flock may be coming to an end.
Total sheep meat exports for NZ have declined on an annual basis for three of the past four years and annual sheep meat export volumes have fallen by 5.6 per cent since 2017, enabling Australian producers to capture export market share in recent years.
Indeed, as BLNZ notes, in recent years Australia has captured the dominant trade position, accounting for 42 per cent of the global sheep meat trade, compared with 39 per cent for NZ.
With NZ more focused on beef and dairy growth, there are emerging opportunities at a global level for sheep meat demand that Australian sheep meat producers can benefit from.
For example, the US has been a growing market for Australian sheep meat exports this past year.
Uncharacteristically high volumes of Australian lamb were exported to the US over several months through the middle of 2021.
As the year ended and lamb exports to the US began to taper off, the demand for Australian mutton exports increased significantly.
It will be interesting to see how the US market continues to respond to Australian lamb and sheep exports throughout 2022.
There appears to be a changing dynamic in the demand landscape in the US that is favouring the Australian sheep meat producer.
Furthermore, as the world continues to recover from the economic impact of COVID-19, we should see increased demand returning to traditional markets for sheep meat in the Middle East.
Solid growth prospects continue in South-East Asia and China.
Meanwhile, the emergence of a free trade agreement with the UK (post Brexit) could open more opportunities for the Australian sheep meat sector in the coming years.
Australian sheep meat producers therefore have an opportunity to dominate the global sheep meat export space and take advantage of the strong demand prospects across multiple geographic regions in the coming years.
• Matt Dalgleish is a manager of commodity market insights at Thomas Elder Markets (TEM)
