Australia is drowning in a mutton glut that has sent prices tumbling 70% in the past year, plunging sheep farmers into crisis. With feeding costs high and profits evaporating, many farmers are culling or even giving away their flocks instead of rearing them on-farm.
So how did Australia end up with a sheep surplus so large that it has crushed an entire industry? And what does it mean for the future of the nation’s sheep farmers and your next rack of lamb? Read on to find out.
Millions More Sheep After Years of Ideal Weather
At the heart of Australia’s ovine crisis is the massive expansion of the national flock over the last three years. Spurred by a run of good seasons with ample rain, the sheep population has ballooned 23% from its 2020 low to reach 78.75 million head – the highest level since 2007.
“The more it rained and the longer the market stayed buoyant, the more it drove producers to retain sheep they’d otherwise turn off,” explains Sheep Producers Australia chairman Andrew Spencer. Instead of sending lambs to market, farmers kept more animals to breed up their flocks while conditions allowed.
The burgeoning sheep population might not have been an issue if the boom times had continued. But Australia’s luck changed in 2022. On the back of three wet years, this September was the driest on record. And forecasts suggest more hot, dry weather ahead as El Nino continues and a strong positive Indian Ocean Dipole develops.
With the landscape parched and paddocks bare, farmers now face the double bind of crashed mutton prices plus spiralling costs to bring in feed. For many, offloading sheep has become the only viable option.
Slaughterhouses Overwhelmed, Backlog Builds Up
Farmers urgently need to downsize their unprofitable flocks, but abattoirs and meat processors can’t keep pace. These facilities continue operating below capacity due to ongoing skills shortages and labor issues.
There’s also a major backlog after last year’s huge sheep turnoff. It’s a perfect storm with too many sheep and too few slaughterhouses that has brought the industry to a standstill.
On farms, the livestock continues accumulating as distressed farmers send more animals to market. And with nowhere for the sheep to go, wholesale mutton prices have gone off a cliff, dropping 70% over the past year to just $1.23/kg carcass weight.
Farmers Left With Impossible Choice
The plunging sheep prices have devastated farm incomes already hit by high feed costs. Many producers now face impossible choices.
“Farmers have [since] seen a massive fall in profitability … Many sheep may not have a market which could lead to farmers destroying animals,” explains WAFarmers vice president Steve McGuire.
Faced with worthless sheep and mounting bills, farmers’ first preference is to give away stock rather than cull them. But McGuire says there’s been little interest in taking free sheep with the industry so overloaded.
With cash flow critical, the nuclear option of mass culls could soon materialize – an economically and emotionally shattering outcome for sheep producers.
Oversupply Weighs on Global Wholesale Prices
As the world’s leading sheep exporter, Australia’s surplus is flooding global markets and driving down international wholesale prices. Domestic supermarket chains have started discounting lamb products to shift supply, with Woolworths cutting retail prices by 20%.
The deepening price cuts at every level of the supply chain reflect the vast structural oversupply of sheep. Until the backlog clears, Australian farmers along with local and overseas consumers should expect mutton prices to keep falling.
Boom-Bust Future for Reeling Sheep Industry
Looking ahead, the Australian sheep sector faces a highly volatile future. Many farmers aren’t even mating their flocks this year to avoid further costs.
This raises the very real prospect of the market flipping from a glut into a shortage in coming years if flocks aren’t replenished. Sheep numbers could then crash below requirements, resulting in a price explosion.
That rollercoaster outlook is worrying for sheep producers already shaken by events this year. A recent survey by the National Farmers Federation found more than 60% of farmers feel no more positive about the future than a year ago.
After consecutive crises from droughts to floods, bushfires and global pandemics, Australia’s sheep farmers are used to adversity. But the speed and scale of this year’s collapse in a sector that underpins many family farms has left many questioning their ability to bounce back yet again.