Goat production in Australia has risen profoundly in recent years, facilitated by the improved seasonal conditions and sustained focus on producer specialization. Along with the increase in managed goat enterprises, the rising returns for goat meat has challenged traditional livestock options, while supply chain improvements have facilitated improved market access.
However, the recent headwinds driven by international markets have triggered a sharp decline in goat prices in the second half of 2022, as the market comes under pressure from many angles, including supply chain bottlenecks and fragile consumer confidence. Over the Hooks (OTH) prices for goatmeat peaked at 920c/kg cwt in June 2022, which quickly retracted by 47%, to 485c/kg cwt in November (MLA).
Driven by three consecutive seasons of favorable conditions, especially in regions more suited to goat production in 2021 and 2022, Australia has seen a very strong recovery of stock numbers. Matching the surge in supplies was high consumer demand, along with additional processing capacity, which had seen prices skyrocket across the past two years. Figure 1 below illustrates the indexed prices of goats, sheep, and cattle from 2016-2022, highlighting the comparatively strong run for goat prices in late 2021 and early 2022. Coming out of the drought, goat prices responded quickly, with prices rallying to new highs. This was followed by both sheep and cattle prices which saw the ESTLI and EYCI reach impressive peaks in September of 2021 and January of 2022, respectively.
Figure 1: Average monthly OTH goat (12-16kg cwt), EYCI and ESTLI prices on a c/kg basis, indexed from Jan 2016 (Index = 100). 2016-November 2022
Indeed, taking the Australian goat market as a leading indicator, with faster implementation of higher production and slower export markets - is the sharp decline in goat prices considered the “canary in the coalmine” for the larger livestock sectors?
We know that both the cattle herd and sheep flock have been in expansionary phases, with additional production forecast to hit the markets in 2023 and concerns regarding processing bottlenecks. With the economic conditions and consumer sentiment in overseas markets expected to be tougher in 2023, the outlook for Australian livestock prices initially looks rougher than in previous years.
Given the heavy influence upon export markets for Australian goat meat, most notably from the US, which takes approximately 57% of total shipments, the recent decline in prices is grounded from overseas. Clear concerns around rising costs of living, higher interest rates and a looming recession continue to weigh on international markets – with a direct and comparatively quicker feedback loop for the Australian goat market.
Goat production in Australia had been rising since 2020 - underpinned by positive seasonal conditions and an increase in the amount of specialized goat producers. 2022 yielded a very strong start to goat throughput on AuctionsPlus, with the first three months of the year registering a total of 54,512 head listed online - 115% higher than the same period in 2021. January saw the largest monthly listing of goats on the platform with 25,267 head offered, selling to a strong market. Fast forward to the winter months, and goats followed a similar trend to the sheep and lamb market, with listings decreasing significantly across the second and third quarters of the year. As seen in Figure 2, listings across quarter two and quarter three of 2022 were back 49% and 72% respectively on 2021 numbers, while the final quarter of 2022 is shaping up to follow a similar trajectory.
Figure 2: AuctionsPlus monthly goat throughput and average c/kg lwt price returned from April 2019-November 2022.
Recent declines in listings and c/kg prices in AuctionsPlus commercial goat sales can be attributed to widespread wet conditions, labor shortages and processing backlogs. There is however a myriad of factors outside of Australia which weigh heavily on the value and demand of both rangeland and managed goats.
The strong gearing of the goat market to overseas importers influences its sensitivity to the demand from and performance of international markets. Figure 3 provides a snapshot of the Australian goat export market for the year-to-date in 2022. Just 9% of total goatmeat produced in Australia is traded domestically (MLA), while the remaining 91% is exported. The US is the largest importer of Australian goat meat - taking approximately 66% of total Australian exports in 2021 and 57% YTD in 2022 (MLA).
Figure 3: The Australian goat export market YTD 2022. Left: Proportion goatmeat to international and domestic markets. Right: Top 5 importers of Australian goatmeat with their import weight (tonnes swt) and proportion of total goat exports.
The US, which is a critical link in the export chain for Australian goat meat, has played a substantial role in the softening goat market in the second half of 2022, as the cost-of-living crisis and retail prices of meat play-off against each other. The high cow slaughter rates in the US have seen their total red meat infantry in cold storage for August sit 20% higher than in 2021 (UTAH farm Bureau), subsequently constraining red meat prices on a retail level. While this has been noted as a short-term price trend, the retail pressure for meat in the US has had a knock-on effect, causing negative ramifications on the value of the Australian goat market as overall demand eases.
To reinforce the “canary in the coal mine” metaphor, reduced consumer sentiment combined with headwinds from economic conditions and overseas markets has facilitated a decline in goat prices online and OTH. Further to this, the EYCI has recently registered significant declines, with the latest price closing at 869.7c/kg cwt on December 5th – 22% lower year-on-year and 15% lower than the previous month. While there are a multitude of factors influencing price performance, market drivers which impact one livestock commodity are certain to impact others, just at varying magnitudes. Despite the relatively small and “niche” market compared to sheep and cattle, the goat industry can play a vital role as the “canary”, where national and global market drivers impacting price and demand can be echoed to an extent across the broader livestock industry.
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