Issue Number: 6

Date: July 2017

Sheep NotesNewsletter of the Department of Primary Industries and Regional Development (DPIRD)

Summary The Western Australian (WA) sheep flock numbered 13.9 million head in July 2016, a year

on year increase of 2% compared to 2014/15, accounting for approximately 21% of the national sheep flock. Total turn-off in 2015/16 was 5.9 million head – up 6% from the previous year.

In 2015/16 the Gross Value of Agricultural Production (GVAP) from wool was $661 million increasing 22% year on year and $513 million from sheepmeat – up 7% year on year.

Between 2012 and 2016, lamb slaughter increased 85% from 1.6 million to 3.0 million – the highest volume of lamb slaughtered on record. Sheep slaughter reached 1.2 million.

WA wool receivals reached 85.8 million kilograms (kg) in 2016, increasing 10% year on year.

In 2017, WA sheep and wool prices have shown strong growth:

o The WA heavy lamb over the hooks indicator (OTHI) averaged 623 cents (c)/kg in June 2017 while the sale yard indicators (SYI) June average was 635c/kg – the highest prices received over the last decade.

o The mutton OTHI averaged 460c/kg in June and the SYI averaged 445c/kg in June, also the highest prices received in the last ten years.

o The WA live export quotation reached $115/head in June.

o The Western Market Indicator (WMI) reached an average of 1541c/kg in June, 13% higher than that seen at the same time last year.

o The 19 micron price guide (W19) averaged 1925c/kg in May, the highest price reached in the last decade, but softened to 1827c/kg in June.

There was an increase of 129% in the volume of lamb exported between 2012 and 2016 to 41.7 million kg, and a 165% increase in value to $245.6 million – the highest value and quantity of lamb exports ever reached in WA.

WA live sheep exports reached 1.74 million head in 2016, worth $196.5 million. This was an increase of 35% compared to 2013.

In 2016 the volume of wool exported from WA reached 58.7 million kg, while the value reached $536.9 million; the highest value reached in the last decade.

ContentsSummary..........................................................................................................................................0

Flock size and dynamics...................................................................................................................2

2016/17 WA flock projection.............................................................................................................5

Slaughter.......................................................................................................................................... 5

Wool production................................................................................................................................6

Prices................................................................................................................................................7

Heavy lamb indicator.....................................................................................................................7

Mutton indicator............................................................................................................................ 8

Live export quotation.....................................................................................................................9

Wool prices................................................................................................................................. 10

Quantity of exports..........................................................................................................................12

Sheepmeat..................................................................................................................................12

Live sheep export........................................................................................................................13

Wool............................................................................................................................................14

Value of exports..............................................................................................................................16

Sheepmeat..................................................................................................................................16

Live sheep export........................................................................................................................17

Wool............................................................................................................................................19

Key market – Qatar.........................................................................................................................21

Weather watch................................................................................................................................23

Appendix: Western Australian sheep turn-off 2016........................................................................25

Contact

Kate PritchettResearch OfficerGrains and Livestock IndustriesDepartment of Primary Industries and Regional Development+61 (0)8 9892 8499+61 (0)429 700 317Kate.pritchett@agric.wa.gov.au

Important disclaimerThe Chief Executive Officer of the Department of Primary Industries and Regional Development and the State of Western Australia accept no liability whatsoever by reason of negligence or otherwise arising from the use or release of this information or any part of it.

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Copyright © Western Australian Agricultural Authority, 2017

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Flock size and dynamicsThe Western Australian (WA) sheep flock has been experiencing a phase of stability in recent years hovering between 13.6 and 15.2 million head. As of July 2016 the flock numbered approximately 13.9 million head, a year on year increase of 2% when compared to 2014/15 (Figure 1). The WA flock accounts for approximately 21% of the national sheep flock which numbered approximately 67.5 million in 2015/16.

The total turn-off, which includes sheep and lamb slaughter, live export and interstate transfers, reached 5.9 million head in 2015/16. This was up from 5.5 million head in 2014/15 an increase of 6%. This was largely due to an increase in the volume of lamb slaughtered.

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Figure 1 The Western Australian sheep population and total turn-off (Based on Australian Bureau of Statistics (ABS) data, analysed by the Department of Primary Industries and Regional Development (DPIRD))1

As illustrated in Figure 2, the largest proportion of turn-off in WA is attributable to lamb slaughter which in 2015/16 accounted for 47% of total turn-off. This has increased steadily in recent years from 30% in 2010/11 to 47% in 2015/16. Sheep slaughter accounted for 23% of turn-off in 2015/16, live export accounted for 28% and interstate transfers accounted for 1%. The proportion of sheep disposed of through live export has declined over the last eight years from around 40% in 2008/09 to 28% in the last financial year.

1 The ABS has revised the cut-off for the Estimated Value of Agricultural Operations (EVAO) for farm businesses from $5000 to $40 000 in 2015/16 affecting the flock estimate. Flock estimates have been backdated to 2010/11 using the new EVAO of $40 000.

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Figure 2 Composition of WA sheep flock turn-off (Based on ABS and the Department of Primary Industries and Regions South Australia (PIRSA) data, DPIRD analysis)

Whilst interstate transfers only accounted for 1% of total turn-off in 2015/16 there has been a dramatic rise in 2016/17 as evident in Figure 3. During the last financial year interstate transfers totalled 314 000 head of which 67% were adult sheep and 33% were lambs. The number of both sheep and lambs moving east was higher in the latter half of 2016 than it has been in the first half of 2017.

One of the reasons for the 2016/17 exodus may be the difference in price between eastern states sheep and Western Australian sheep. At times in late 2016 the difference in price for a 24kg carcase weight (cwt) heavy lamb was in excess of $35 in the sale yards and for mutton was over $30 (24kg cwt animal). While the price difference of heavy lambs has reduced in 2017 to $6/head in June the price difference of mutton remains quite high at over $19/head.

Dry seasonal conditions in WA are also expected to impact the number of WA sheep leaving the state in coming months, however numbers are well below the 2010/11 figures when almost 1.3 million head were moved interstate due to seasonal conditions.

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Figure 3 Cumulative number of sheep and lambs transferred interstate through the Ceduna checkpoint (PIRSA data, DPIRD analysis)

The WA sheep industry makes up approximately half the Gross Value of Agricultural Production (GVAP) for livestock industries in WA. In 2015/16 the sheep industry accounted for 44% of the total livestock GVAP – 19% came from sheep and lamb disposals including live export and 25% came from wool sales. The GVAP for wool was $661 million in 2015/16 – up from $540 million in 2014/15, an increase of 22%, while the GVAP of sheep and lamb disposals was $513 million, increasing 7% year on year from $479 million (Figure 4).

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Figure 4 Gross Value of Agricultural Production of WA livestock commodities (Based on ABS data, DPIRD analysis)

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2016/17 WA flock projectionAs of July 1 2016 the WA sheep flock numbered approximately 13.9 million head as seen in Table 1. Given the average proportion of ewes joined and the five year average marking rate of 90%, this would equate to 5.82 million lambs marked over the year. If turn-off continues to follow the current trajectory around 5.88 million sheep and lambs may be turned off, giving a closing flock number of 13.1 million head – a fall of 5.7% over the course of the year.

In order for the flock to maintain its opening size of 13.9 million head a marking rate 102% would be required. This would provide 6.6 million lambs marked, compensating for both the turn-off of 5.88 million and the losses of 0.7 million head.

A 93% marking rate as was the ABS estimated marking rate in 2015/16 would give a closing number of 13.3 million head- a year on year decline of 4%.

Table 1 2016/17 Flock projection for WA (Based on ABS and PIRSA data, DPIRD analysis)

Opening number of sheep 13.9 million

Number of ewes joined 6.5 million

Marking rate 90%

Lambs marked (est.) 5.82 million

Turn-off No data

Lambs slaughtered 3.0 million

Sheep slaughtered 0.9 million

Live exports 1.7 million

Interstate movements 0.3 million

Total turn-off (est.) 5.88 million

Losses (~5%) 0.7 million

Closing number of sheep (est.) 13.1 million (-5.7%)

SlaughterOver the past decade Western Australian sheep and lamb slaughter has been quite variable as seen in Figure 5. Between 2006 and 2012 WA lamb slaughter declined from 2.5 million to 1.6 million, a decline of 34%. Between 2012 and 2016 there has however been a period of strong recovery with lamb slaughter reaching 3.0 million head in 2016, an increase of 85%, and the highest volume of lambs slaughtered on record.

Sheep slaughter fell sharply between 2008 and 2011 from 2.7 million sheep to 842 000, a fall of 69%. This was in part due to producers rebuilding flocks in 2011 following a drought in the agricultural region of WA in 2010. It may also be due to the increasing importance of lamb enterprises requiring more ewes and fewer wethers in the system, resulting in a reduced ability to turn-off adult sheep.

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Between 2011 and 2013 the volume of sheep slaughtered increased to 1.5 million but has since declined to 1.2 million in 2016.

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Figure 5 WA sheep and lamb slaughter (Based on ABS data, DPIRD analysis)

Wool productionOver the last ten years both Australian and Western Australian wool receivals have declined (Figure 6), however in WA there has been a slight increase in receivals between 2014 and 2016. In 2006 WA wool receivals totalled 115.6 million kg but fell to 72.6 million kg in 2012, a fall of 37%. However, receivals reached 85.8 million kg in 2016, an increase of 18% when compared to 2012 and a year on year increase of 10%. This may be due to strengthening prices and may increase even further in 2017 due to the very strong prices on offer so far during the year.

National wool receivals equalled 462.5 million kg in 2006 but fell to 351.9 million kg in 2012, a fall of 24%. Receivals have been relatively steady since 2012 but have increased 1% year on year from 359.5 million kg in 2015 to 364.7 million kg in 2016.

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Figure 6 Australian (left hand side) and WA (right hand side) wool receivals (Based on ABS data, DPIRD analysis)

PricesHeavy lamb indicatorDuring the last ten years the WA heavy lamb indicators at both the saleyards (SYI) and over the hooks (OTHI) have been on an upward trend as seen in Figure 7. Between late 2016 and June 2017 there has been strong growth in both indicators. Current prices are the strongest seen over the last decade, eclipsing those seen in mid-2014.

The SYI has increased from 412c/kg in October 2016 to 635c/kg in June 2017, an increase of 54%. When compared to the same period last year there has been an increase of 31% from 487c/kg.

The OTHI has increased from 462c/kg in December 2016 to 623c/kg in June 2017, an increase of 35%. In June 2016 the OTHI was 531c/kg.

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Figure 7 Over the hooks (OTHI) and sale yard indicators (SYI) for heavy lamb (22kg+ carcase weight) in WA (Based on Meat and Livestock Australia’s (MLA) National Livestock Reporting Service (NLRS) data, DPIRD analysis)

Mutton indicatorFollowing a period of depressed mutton prices after the highs experienced in 2011, there has been a period of strong growth during 2017 as seen in Figure 8.

In October 2016 the mutton SYI averaged 284c/kg but increased by 57% to 445c/kg in June 2017. This is the highest monthly average during the last decade, even surpassing the highs seen in mid-2011 and is 52% higher than at the same time last year (294c/kg).

The OTHI has also experienced a dramatic climb in 2017. Between August 2016 and January 2017 the OTHI averaged 290c/kg each month before increasing 16% to 336c/kg in March. It declined to an average of 335c/kg in April before climbing further to 460c/kg in June – an increase of 37%. The high price seen in June is 93% higher than the average of 238c/kg (July 2007 to June 2017) and the highest price experienced over the last decade. At the same time last year the OTHI was 273c/kg.

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Figure 8 OTHI and SYI for mutton (22kg+) in WA (Based on MLA's NLRS data, DPIRD analysis)

Live export quotationIn a similar fashion to the mutton and heavy lamb indicators the live export quotation has also seen a period of growth in 2017 as evidenced by Figure 9. In April 2017 the price for live sheep reached an average of $122/head, a 38% increase when compared to the $88/head averaged in December 2016 and the highest monthly average since July 2011. In June there was a softening as the average price fell to $115/head, though still a strong price which is in the 91st percentile (July 2007-June 2017). In June 2016 the live export quotation averaged $100/head.

The dashed black line represents the average monthly live export price of $87/head received between July 2007 and June 2017. As seen in the chart below the price dipped below this briefly in November 2015 when it reached a low of $86/head, but other than that has been above the average since the start of 2015, illustrating the increasing strength of the live export market.

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Figure 9 Live export quotations in WA (Based on MLA's NLRS data, DPIRD analysis)

Wool pricesAs seen in the meat and livestock prices there has also been considerable growth in the WA wool prices during 2017, further continuing the WA sheep industry’s purple patch.

The Western Market Indicator (WMI) reached an average of 1541c/kg in June 2017, 13% higher than the average price received in June 2016 of 1366c/kg. It is 41% higher than the average price of 1094c/kg received between July 2007 and June 2017.

The Western 19 micron price guide (W19) has seen a period of even more exceptional growth than that of the WMI (Figure 10). The W19 reached 1925c/kg in May 2017, a year on year increase of 29% from 1487c/kg in May 2016 and the highest price reached over the last decade, well above the average of 1270c/kg. In June it has softened slightly to 1827c/kg however is still 24% higher than at the same time last year.

The margin for finer wool types continued to increase with the difference between the W19 and the WMI increasing to 25% in May 2017, before declining to 19% in June. At the same time last year the margin was 8%.

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Figure 10 The Western Market Indicator (WMI) and the Western 19 micron price guide (W19) (Based on data from the Australian Wool Exchange (AWEX), DPIRD analysis)

As mentioned earlier the WMI has seen a period of strong growth in recent months. As seen in Figure 11 the WMI reached 1541c/kg in June 2017 in Australian dollars, however in US dollars reached 1145c/kg. This reflects the weaker Australian dollar against the greenback which is beneficial for WA agriculture due to the large amount of product exported. As 100% of the WA wool clip is exported this works out well for WA wool producers. In June 2017 the WMI was 35% higher in Australian dollars than US dollars.

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Figure 11 The WMI in Australian dollars (AUD) and US dollars (USD) (Based on data from AWEX, DPIRD analysis)

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Quantity of exportsSheepmeat exportsBetween 2012 and 2016 the volume of lamb exported has risen quite dramatically as seen in Figure 12. In 2012 WA exported 18.2 million kg of lamb meat; however this increased to 41.7 million kg in 2016 – a rise of 129% and the highest volume of lamb exported on record.

This marked increase in the volume of lamb exported has outstripped the rise in lamb slaughter over this time largely due to increased international demand. The proportion of lamb meat that is exported has risen from 51% of lamb meat produced to 63% between 2012 and 2016.

The trend however has not been as positive for mutton exports. In 2006 WA exported 40 million kg of mutton to overseas markets which increased to 43 million kg in 2008, however between 2008 and 2011 there was a sharp decline in the volume of mutton exported to 17.5 million kg – a fall of 59%. There was a recovery between 2011 and 2014 to 35.4 million kg however between 2014 and 2016 it has declined 19% to 28.5 million kg.

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Figure 12 Volume of WA mutton and lamb meat exported in million kg carcase equivalent quantity (ceq) (Based on ABS data, DPIRD analysis)

In 2016 five markets accounted for 50% of the sheepmeat exported from WA. The largest market was China who accounted for 18% of total sheepmeat exports or 12.8 million kg in 2016. China has been WA’s largest overseas sheepmeat market since 2012. The second largest market was the United Arab Emirates (UAE) who accounted for 10% of exports or 6.9 million kg of sheepmeat followed by Qatar with 5.6 million kg or 8% of exports. Jordan accounted for another 7% of sheepmeat exports along with by Saudi Arabia with 7%. Another 44 markets accounted for a total of 50% of total exports (Figure 13).

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Figure 13 Major export markets for WA sheepmeat by volume (Based on ABS data, DPIRD analysis)

Live sheep exportsOver the last decade the quantity of live sheep exported from both WA and Australia as a whole has declined as evident in Figure 14. In 2006 WA exported a total of 3.37 million sheep to overseas markets but this fell steadily until 2011 when WA exported only 1.70 million sheep, a decline of 50%. Between 2011 and 2014 there was a marginal recovery with total exports reaching 1.96 million before falling back to 1.74 million in 2016.

The story has been very similar for Australia with 4.16 million sheep exported in 2006 declining to 1.97 million in 2013 – a fall of 53%. There was a slight strengthening in live exports in 2014 to 2.31 million sheep however it resumed falling soon after, reaching 1.87 million in 2016.

Despite the decline in WA live sheep exports, the proportion of Australian live sheep exported from WA has increased from 81% in 2006 to 93% in 2016. There was a reduction in WA live sheep exports during 2011 due to a drought recovery phase following the 2010 drought in the agricultural regions. At this time WA’s share of the live export market fell to 69% – the lowest proportion of the decade.

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Figure 14 Quantity of Australian and Western Australian live sheep exports (Based on ABS data, DPIRD analysis)

Kuwait continues to be WA’s largest market in volume terms for live sheep export in 2016 as seen in Figure 15. In 2016 Kuwait accounted for 34% of Western Australia’s live sheep exports or 587 000 head. This was up slightly from 574 000 in 2015. The second largest market was Qatar following significant growth between 2015 and 2016. In 2016 Qatar accounted for 32% of live exports or 555 000 head – up 76% from 315 000 in 2015. Jordan was the third largest destination with 10% of exports along with the UAE, also accounting for 10%.

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Figure 15 Major markets for the volume of live sheep exported from WA based on the 2016 ranking (Based on ABS data, DPIRD analysis)

Wool exportsDespite a sharp decline in the volume of wool exported by WA between 2006 and 2008, wool exports seem to have stabilised in recent years (Figure 16). Between 2008 and 2009 WA wool

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exports increased from an all-time low of 47.6 million kg to 69.2 million kg. It then declined to 52.0 million kg in 2012 but has risen to 58.7 million kg in 2016 – an increase of 13%.

The volume of Australian wool exported has also seen a period of decline over the last decade. In 2006 Australia exported 471.0 million kg of wool which declined to 333.2 million kg in 2014. Exports have however increased to 338.5 million kg in 2016, a rise of 2%.

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Figure 16 Volume of Australian wool exports (left hand side) and WA wool exports (right hand side) (Based on ABS data, DPIRD analysis)

In both 2015 and 2016 the largest market for WA wool in volume terms was China as illustrated by Figure 17. During 2015 China accounted for 84% of the wool exported from WA, or 47.9 million kg. In 2016 China’s proportion fell by one percent to 83% of exports. Despite the very small fall in the proportion of wool exported to China there was an increase in the total volume exported from 47.9 million to 48.5 million kg. The second largest market was India in 2016 with 8% of exports followed by the Czech Republic with 4%. There were also a larger number of other markets in 2016 when compared to 2015, increasing from 10 to 14.

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China84%

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India8%

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Figure 17 major markets for WA wool by volume in 2015 and 2016 (Based on ABS data, DPIRD analysis)

Value of exportsSheepmeat exportsAs seen in Figure 18, WA has seen phenomenal growth in the value of lamb exports over the last five years in a similar fashion to that seen in the volume of lamb exported (Figure 12). In 2006 WA lamb exports were valued at $110.4 million. This rose steadily until 2010 when it reached $128.2 million, however it fell dramatically to $92.8 million in 2012. Since 2012 it has staged a remarkable recovery, reaching $245.6 million – an increase of 165% and the highest value of lamb exports on record.

The value of Western Australian mutton exports have also seen some growth over the last decade but to a lesser degree than that seen in the value of lamb exports. In 2006 WA mutton exports were worth $95.1 million. This rose to $111.7 million in 2008, but was followed by a period of decline reaching $65.8 million in 2011 at its lowest. This was also during a period of drought recovery where producers retained ewes in order to rebuild flocks. Between 2011 and 2014 the value of mutton exports increased 98% to $130.2 million but has since declined 22% to $101.5 million in 2016.

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Figure 18 The value of WA lamb and mutton exports (Based on ABS data, DPIRD analysis)

The highest value market for WA sheepmeat exports in 2016 was China who accounted for 12% of the total value of exports or $39.6 million. This was followed by the UAE with 11% or $38.9 million and Qatar with 10%. Over the last ten years Qatar has substantially increased their imports of WA sheepmeat from $1.7 million in 2006 to $32.9 million in 2016 – an increase of 1791%. The United States of America (USA) was WA’s fourth largest market accounting for 9% of the value of sheepmeat exported followed by Jordan with 8% (Figure 19).

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Figure 19 Major WA sheepmeat markets by value (Based on ABS data, DPIRD analysis)

Live sheep exportsIn line with the volume of live sheep exports, the value of live sheep exports from both Australia and WA have been on a downward trend over the last ten years (Figure 20). In 2006 WA live

19

sheep exports were worth $235.4 million. This fell to $187.9 million in 2007 but rose to $260.6 million in 2010. There was a marked decline however between 2010 and 2013 when the value of sheep exports fell to $145.0 million. Since then there has been some recovery as the value of live sheep exports has grown to $196.5 million in 2016, an increase of 35%.

The value of live exports from a national perspective has shown a similar pattern. Between 2006 and 2007 the value of live sheep exports fell from $289.0 million to $261.4 million, before rising to $320.3 million in 2008. A period of relative stability was experienced until 2011 when it began to decline, reaching $172.0 million in 2013, a fall of 47%. Between 2013 and 2016 however there has been an increase of 26% to $217.5 million.

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Figure 20 The value of Australian and WA live sheep exports (Based on ABS data, DPIRD analysis)

WA’s top market by value for live sheep exports in 2016 was Kuwait who accounted for 32% of the value of live sheep exports, or $69.1 million. Qatar was the second largest market by value with $59.3 million or 30% of the value of exports. Year on year there has been a 52% increase in the value of live sheep exports to Qatar from $39.1 million to $59.3 million. The third largest market, accounting for 10% of the value of WA live sheep exports, was Jordan, followed by the UAE also with 10% and Israel with 8% (Figure 21).

20

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Figure 21 Value of WA live sheep exports by market (Based on ABS data, DPIRD analysis)

Wool exportsThe value of Western Australian wool exports has been on an upward trend over the last ten years despite a sizeable decline between 2006 and 2008, as seen in Figure 22. Between 2006 and 2008 the value of WA wool exports fell from $530.4 million to $266.2 million before climbing to $465.9 million in 2011. It then swung between this value and $397.8 million until 2014. Between 2014 and 2016 it increased 28% to $536.9 million – the highest it has been over the last decade.

Australian wool exports as a whole have shown a similar pattern over this time. Between 2007 and 2009 the value of Australian wool exports fell from $2.74 billion to $1.84 billion before increasing to $2.84 billion in 2011. Australia then experienced a decline falling to $2.41 billion in 2014. There has since been a recovery with exports reaching a value of $3.02 billion in 2016 – an increase of 25% since 2014.

21

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Figure 22 The value of Australian (left hand side) and WA (right hand side) wool exports (Based on ABS data, DPIRD analysis)

During 2016, as in 2015, China was the highest value market for Western Australian wool exports accounting for 83% of wool exports worth $446.7 million. This is compared to $402.5 million in 2015. The second largest market was India who imported $42.1 million or 8% of total exports in 2016 followed by the Czech Republic with 4% (Figure 23).

China85% India

8%

Czech Republic4%

Malaysia1%

10 Others2%

2015

China83%

India8%

Czech Republic4%

Malaysia2%

14 Others3%

2016

Figure 23 Top WA wool markets by value in 2015 and 2016 (Based on ABS data, DPIRD analysis)

22

Key market – QatarQatar has a population of 2.4 million (2015) which includes a very large expat population of foreign citizens from India, Pakistan, Iran, the Arabic countries and other nations, according to the Department of Foreign Affairs and Trade (DFAT). Qatar borders Saudi Arabia in the Persian Gulf and is a founding member of the Gulf Cooperation Council (GCC), a Middle Eastern political and economic alliance consisting of Qatar, Saudi Arabia, Kuwait, the UAE, Bahrain and Oman.

Australia and Qatar have a strong bilateral relationship, with Australia’s first ambassador to Qatar appointed in July 2016. It is estimated that 5000 Australians live in Qatar and the number of Australian tourists to the country is increasing (DFAT).

Qatar has large oil reserves and the third largest natural gas reserves in the world. Formerly one of the poorer Gulf nations, these oil and gas reserves have transformed Qatar into one of the wealthiest nations in the world and oil and gas revenue has made Qatar’s citizens the richest in the world per capita since 2007. In 2015 Qatar’s per capita gross domestic product (GDP) was estimated at US$133 040 with 4.7% real GDP growth. Oil and gas represent nearly 60% of Qatar’s gross domestic product (DFAT).

Economic diversification is a high priority in Qatar. Major investments are planned for the 2022 FIFA World Cup and to achieve Qatar’s National Vision 2030, which are worth a combined $285 billion in government spending. Qatar also aims to become a centre of educational excellence in the Gulf region (DFAT).

Qatar’s sovereign wealth fund (Qatar Investment Authority and its subsidiary Hassad Food) is a valued source of foreign direct investment in Australia and has invested significantly in Australia’s grain and sheep properties, to support its food security strategy. Demand for Australian live animal exports, food, and meat products are expected to continue to grow (DFAT).

Sheepmeat is popular in Qatar with consumption estimated at 11-16kg per person per year. Increasing urbanisation, growing disposable incomes, westernisation, a young population and large expatriate population are key growth drivers for imported red meat demand (according to MLA).

During 2016 Qatar was one of WA’s largest markets for both live sheep and sheepmeat. They were the second largest market for live sheep accounting for 30% of the value of live sheep exported (Figure 21) and third for sheepmeat exports with 10% of the total value of WA sheepmeat exports (Figure 19).

Over the last five years as illustrated in Figure 24, there has been phenomenal growth in both the value and volume of sheepmeat exports to Qatar. The value of sheepmeat exports has risen from $3.4 million in 2012 to $32.9 million in 2016 – an increase of 857%. The increase in the volume of exports has been similar with exports increasing from 771 000kg to 5.6 million kg over that time, a 623% increase. These increases in sheepmeat exports have been due to increases in lamb exports to the region. Over the last ten years Qatar has shifted from being predominantly a mutton market to a lamb market. In 2006 WA lamb exports accounted for 27 000kg compared to 556 000kg of mutton. In 2016 this had changed to 4.9 million kg of lamb compared to 668 000kg of mutton.

23

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Figure 24 WA sheepmeat exports to Qatar (Based on ABS data, DPIRD analysis)

The last decade has also seen large gains made in the export of live sheep from WA to Qatar as seen in Figure 25; however it has been a little more volatile than that seen in the export of sheepmeat. In 2006 WA exported 76 000 head to Qatar, but this has risen to 555 000 in 2016 – an increase of 629%. The value of live exports has grown even more significantly having increased 1048% over the last decade from $5.2 million in 2006 to $59.3 million in 2016, despite not having reached the peak of $68.2 million in 2012.

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Figure 25 Live sheep exports from WA to Qatar (Based on ABS data, DPIRD analysis)

In the Middle East, home-cooking of sheepmeat dishes like stews and slow cooking, grilling of cubes for kebabs and mince as a filling for pastries and kofta are widespread. Grilling of prime cuts is also popular in the region (MLA).

24

Australia has traditionally been the region’s main source of sheepmeat and live sheep, accounting for around two-thirds of imports in 2016. Australia’s key competitor is New Zealand as well as India and Pakistan. Key competitors in the live export market are India, Somalia and Sudan, as well as Romania, Georgia and Spain (MLA).

In June 2017 political tensions in the Gulf have risen, namely between Qatar and some other countries in the region after Saudi Arabia, UAE, Bahrain, Yemen and Egypt announced they were severing diplomatic relations with Qatar. Since then Mauritius, Mauritania, the Maldives and Libya’s eastern based government have also severed ties with Qatar. The crisis has resulted in all land, sea and air transport links to Qatar being severed by the aforementioned countries. Qatari diplomats have been told to leave their foreign posts in these countries and Qatari nationals have been given two weeks to leave (CNN).

It is alleged that Qatar has been supporting terrorist organisations, namely the Muslim Brotherhood, as well as Iran, and destabilising the region, however Qatar denies these allegations (Al Jazeera).

If the crisis continues unabated this may result in rising oil and gas prices (CNN). It may also create food security issues due to the cutting of transport links as all food in Qatar is imported. This will in turn affect WA exports of sheepmeat and live sheep to the country.

Weather watchAs illustrated in Figure 26 for the six months between December 2016 and June 2017 the majority of WA had a wet time of it. The agricultural zone in south west WA where the majority of the WA sheep flock are located was no exception. This was largely due to the February rain event which caused severe flooding in the Wheatbelt and south west following falls of nearly 200 millimetres (mm) over a 24 hour period. There were reports of widespread damage to roads and farm infrastructure.

However following this severe weather event seasonal conditions in the south west have been very dry as seen in Figure 27 where conditions have been below average or very much below average. This may be causing producers to reduce stocking rates due to a lack of feed availability and delayed seeding the 2017 crops. The Bureau of Meteorology is predicting a warmer and drier June and or winter for most of southern Australia including WA.

25

Figure 26 Australian rainfall deciles between December 2016 and June 2017 (Source: Bureau of Meteorology)

Figure 27 Australian rainfall deciles between March and June 2017 (Source: Bureau of Meteorology)

26

Appendix: Western Australian sheep turn-off 2016

34% 32%590 $63M

32% 30%560 $59M

10% 10%1,740 180 $20M$196M

10% 10%180 $19M

7% 8%120 $17M

7% 9%120 $18M

26%25,000

18% 11%12,800 $40M

74%70,000 10% 11%$347M 6,900 $39M

8% 9%5,600 $33M

7% 8%5,200 $29M

7% 7%5,000 $25M

Source: Based on ABS data, DAFWA analysisValues in blue are Number of head ('000), values in red are tonnes (carcass equiv.), values in green are $A million (FOB). 49% 52%Totals and sums of component items may differ due to rounding. 34,700 $181M

2016Year :

United Arab Emirates

Jordan

Qatar

Kuwait

Other markets (n=44)

Jordan

Saudi Arabia

68%

4,234

Qatar

United Arab Emirates

Interstatetransfers

Other markets (n=5)

Domesticslaughter

China

Domestic consumption

Israel

Live exports

Sheep Disposals

by Western

Australian Producers

1,740

4%

231

28%

Western Australia

28