Australia and New Zealand are the country’s dominant suppliers, giving them a competitive edge over other producers
Higher incomes in China are giving more families chances to buy meat that was once 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 seen less long-term growth due to high competition from its dairying and forestry sectors.
Australia and New Zealand are at the forefront of meeting the 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 United Kingdom holds the largest sheep flock in the European Union and is the largest producer of lamb and mutton in the EU.
While the EU is the second largest importer of lamb, its imports have been falling since 2010 due to economic instability and declining consumption and production.
Lamb and sheep production is vital to the U.K. economy but since it operates in an increasingly open global market where competition, trade agreements and market access can influence its future, it is volatile.
Plus, with Brexit looming and the uncertainties of the trading situation that might bring, the U.K. could face either a lamb export crisis or become a strong player in non-EU markets.
Another key influencer in world lamb import markets is the Middle East/North Africa (MENA) region, where demand is also increasing as the tradition of eating sheep meat intensifies.
Several uncertainties are expected to 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.
Changes in consumer trends to another meat in the future are also challenges facing sheep meat exports.
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.
A report published by the Agriculture and Horticulture Development Board (AHDB) in the U.K. assesses the global situation of sheep meat production and demand.
It also looks at the forecasts for sheep meat exports in the future to 2025 and what factors could influence the sector.
The report highlighted that the success of any country’s export market for sheep meat in the future relies on government policy. As voters start swinging to far-right parties, a new party in power could change policy.
U.S. President Donald Trump’s administration 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 there. This will herald from any impact of environmental legislation on the livestock sector, plus further competition from the dairy sector.
In Australia, climatic conditions will continue to play a part in production developments there as witnessed in the current drought conditions across the country but seen mostly in New South Wales.
Global production and consumption of sheep meat are forecast to grow by slightly more than one percent per year, 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 percent per year in line with the historical increase.
The high scenario offered in the report is one of sustained strong positive price and demand developments, plus a sustained move toward 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 percent per year with trade rising by more than three percent per year.
The low scenario is the 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.
The AHDB report concluded there could be a switch of supply for New Zealand lamb if it chose 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 because that adds value to the lamb carcass 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 U.S. will also remain an important market for prime lamb and a further rise in imports could be coming.
However, the main concern is how long the Chinese demand will continue to increase. China could become more self-sufficient in sheep production and throw the export trade into chaos.