Lamb and Mutton Markets

Lecture 6: Lamb and Mutton Markets

Brent McLeod, Bill O’Halloran, Chris Shands

Learning objectives

• Understand the significance of the Australian sheepmeat industry • Improve your knowledge and skills in producing lambs and sheep to market specifications • Understand the reasons why Australia has a live sheep trade with other countries and why at various times this is controversial • Recognise customer requirements dictate the existence of the trade in parallel with the export carcase trade • Gain an understanding of the management factors that will improve returns from lamb and sheep skins

Key terms and concepts Domestic markets; market specifications; export markets; live sheep export; lamb and sheep skins. 6.1 What consumers want from lamb The lamb industry in the 21st century is a modern, versatile and ‘trendy’ industry that has undergone major changes in the last decade to provide consumers with a quality product that offers versatility, value for money and an enjoyable eating experience.

Buying preference • When consumers buy lamb they look for a low fat product that has acceptable meat colour and is value for money • Consumers prefer to choose cuts from lean carcasses (fat score 2 or 3). Research shows that excess fat on lamb is considered unhealthy and unacceptable • Consumer surveys indicate that food safety, convenience and price are the three main drivers that make them purchase lamb.

Eating quality Having bought a particular cut the main aspects people consider when eating lamb are: • tenderness • juiciness • flavour.

Because lamb is young, it is generally tender, juicy and flavoursome, but not always. Some on-farm and off-farm procedures can affect these attributes, spoiling these major selling points for lamb (for more information refer to Lecture 10, Sheep Meat Eating Quality).

Versatility Lamb now competes with an ever-increasing number of protein alternatives. To hold its market share, lamb has to be versatile and easy to prepare. Lifestyle changes in modern society have resulted in: • increasing numbers of alternatives to red meat • fewer young people eating red meat regularly and some not at all • less meal preparation time available.

To compete, lamb has been forced to increase its versatility and reduce the plate waste of fat and bone. At the same time it must maintain its competitive advantages in eating pleasure.

The challenge for lamb The challenge is to produce want consumers want. Success in a competitive market place requires the supply of a product addressing three key issues • consistency in quality • marketing proactively • a reasonable price. The next five lectures will outline the different markets for lamb, methods for meeting these market specifications, lean meat yield and factors affecting sheep meat eating quality. WOOL412/512 Sheep Production ______6-1

6.2 Markets for lamb There are many different markets for lamb. The changing attitude of consumers has ensured that more of our customers specify what they want in terms of carcase weight and fat depth through their buying preference. Product specifications are the only way that price signals from consumers can reach producers accurately.

Domestic trade lambs (17 to 24 kg, GR fat 6 to 15 mm) are the most common specifications. The supermarket share of the domestic lamb industry has been expanding. Second cross and first cross lambs are preferred.

Supermarket trade lambs (18 to 24 kg, GR fat 8 to 12 mm) are preferred by more progressive retailers due to higher carcase yields with more versatility and range in available products. This market demands high value for money. The retailers expect to receive lamb with very good meat and fat colour and muscularity consistently throughout the year. This is a specialist market suited to second cross lamb producers.

Food service (20 to 25 kg, GR fat 7 to 15 mm, with 15 mm the absolute maximum). The lamb type preferred by the high value food service operators, such as restaurants, is lean and high yielding. Weight variation is limited to a range of 2 kg, as consistent “serve size” is extremely important at the top end of this market. Processors and boning rooms now specialise in the supply of portion controlled cuts to meet these requirements. Other food service operators accept a wider range in specifications. They receive comparatively lower prices from their clients and are prepared to trim over fat carcases.

At the bottom end of this market are the “pub and club” suppliers who buy heavy lamb with more fat – they tend to sell whole legs and provide a product which is comparatively cheap. Many food service companies buy primal cuts of lamb (legs, rumps, loins, racks) instead of a full carcase.

Other domestic markets Underlying all of these domestic market specifications are the non descriptive specifications of retailers and small goods manufacturers who specialise in using lamb which is not suitable for the above markets. These firms generally purchase lambs by price and buy from any supplier when the product is cheap enough.

6.3 Export lamb specifications The exports of Australian lamb exceeded 45% of production in 2010 (MLA Australian Sheep Industry Projections) and were worth over $970 million (Figure 6.1).

Figure 6.1: Value of Australian Lamb Exports (ABARES commodities report March 2011).

Most Australian export lamb is processed into six or eight way cuts. Cuts derived from one lamb could find their way to any of the 60 major export destinations (Figure 6.2).

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Other 12%

South East Asia US 6% 22%

Pacific 6% Japan 5%

Middle East China 24% 15%

European 10%

Figure 6.2: Australian Lamb Exports by destination (MLA Australian Sheep Industry Projections 2011).

Heavy export (20 to 30 kg, GR fat 6 to 20 mm). The Northern American market continues to expand requiring a consistent supply of high quality lamb throughout the year. The US market is targeted for most of the “prime” lamb cuts such as racks, loins and boneless legs.

Light export (10 to 14 kg, GR fat up to 10mm). The Middle East, particularly the United Arab Emirates, is the volume market and requires whole carcases that are lean, almost “store-like.” Demand is price sensitive and supply driven. If producers have adequate feed supply, they are unlikely to target this market. Lambs sold into these markets are generally merino weaners.

Other export markets High value and growing markets for Australian lamb are the EU and Japan. Most of the products destined for this market are tender loins, full loins and racks. The majority of these lambs go to supermarkets and restaurants.

Large volume markets for lower valued cuts are Papua New Guinea (brisket and flap), Mexico (shoulder) and China and South Africa. These markets are growing and returns are much better compared to the same product on the domestic market.

6.4 Live sheep exports First reports of sheep exported from Australia were in 1845. By 1895, about 1000 sheep annually were being exported from Western Australia to Singapore. The modern live sheep trade began in 1945/46 with the shipment of more than 24,000 sheep to Singapore in temporarily converted vessels.

The regular trade to the Middle East developed during the 1970s, with demand coming principally from Iran. Exports to other Middle East countries also developed during the late 1970s and 1980s and at its peak, Saudi Arabia imported 3.5M head in 1987. The large number of expatriate workers in the oil industry and the major shift in affluence brought about by the oil industry are key contributors to demand.

The live sheep trade today is focused on the Middle Eastern markets with an increasing emphasis on product quality and market specifications. A small number of live sheep are exported for breeding to other sheep producing nations. The export destinations for live sheep are shown in Figure 6.3.

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Figure 6.3: Trends in Live Sheep Exports by Destination (MLA Australian Sheep Industry Projections 2011).

Market requirements Initially the demand for Australian sheep in the Middle East was for larger older animals as these represent the best value in terms of dollars per kilogram live weight.

As markets have matured, there has been an increasing emphasis on quality and meeting the Middle East preference for leaner animals. As a consequence, most countries now seek to import younger animals, although there remains a strong commercial emphasis on the cost per kilogram live weight.

The development of the trade has resulted in significant adjustments within the Australian sheep industry. The live sheep export trade has provided a base in prices for surplus wool-growing wethers and thus higher on-farm profitability.

Western Australia has supplied the majority (55 to 80%) of live sheep to Middle Eastern markets because of its proximity to the markets (less steaming time), more live sheep loading ports and a focus on supplying to the markets specifications.

Producers considering supplying sheep to the trade should consider:

• The location of their nearest live sheep export port. Transport costs to the port of $5 to $15 per head could negate any benefit over the mutton trade • Market requirements such as preferred breeds, live weights and fat scores (see Table 6.1 below) • Meeting other quality assurance specifications such as entire male lambs or hoggets and scabby mouth vaccination • Pre-conditioning animals to feedlot rations.

The market is attracting an increasing number of young sheep as well as fat-tailed sheep originating from the Middle East and Africa such as the Damara, Awassi and Karakul.

Some special conditions apply such as the requirement for long tailed sheep and lighter sheep for the Saudi market leading up to the Haj festival.

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Table 6.1: The common specifications for live sheep to various destinations. Retrieved Aug, (2003). Source: http://www.livestock.elders.com.au/live_exports.asp. Middle 50 – 60 kg Wethers Up to full mouth Castrated males East 34 – 37 kg Merino lambs Lambs Castrated males

34 – 37 kg XB lambs Lambs Castrated males

55 – 65 kg Rams Up to full mouth Males

36 – 40 kg Damara F1 ram Lambs Males lambs

Saudi 36 – 38 kg Any ram lamb with Lambs tooth Males tail

42 – 45 kg Ram hoggets/with Max 2 tooth Males tail

48 – 50 kg Rams Up to 4 tooth Males

35 – 40 kg Damara fattail Up to 4 tooth Males

50 - 60 kg Wethers Up to 6 tooth Castrated males

Note: He Note: Health protocol requires Scabby Mouth vaccination program to Saudi Arabia.

Kuwait 52 – 62 kg Wethers Up to full mouth Castrated males

44 – 50 kg Young wethers 2,4,6 tooth Castrated males

Jordan 45 – 52 kg Wethers Up to 4 tooth Castrated males Sheep

Egypt 50 - 55 kg Merino wethers Lambs - Up to 4 Castrated males tooth

Value of the live sheep trade to Australia The live export chain is estimated to generate 9,000 jobs nationally and for every $1 generated an additional $0.50 is created in flow-on economic activity, predominantly in rural and regional areas. Figure 6.4 shows trends in the number of live sheep exported annually and the value of this trade.

Figure 6.4: Live sheep number and value (1996-2010) (MLA Australian Sheep Industry Projections 2011).

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© 2013 The Australian Wool Education Trust licensee for educational activities University of New England Notes – Lecture 6 – Lamb and Mutton Markets 6.5 How the live sheep trade operates Sourcing and transporting sheep Sheep are sourced from producers either on-farm or at auction and are transported to export port holding facilities where they are drenched and tested for compliance with the importing country's disease protocols. Vaccination against scabby mouth is a requirement of the Saudi Arabians in particular, who have rejected two separate shipments in the past, ostensibly because of a higher than acceptable level of this disease. Scabby mouth vaccination is carried out on farm prior to sale.

The main Australian export ports are in WA (Fremantle and Geraldton), SA (Port Adelaide) and Victoria (Portland). The majority of sheep originate from WA (81% in 2010), SA (4%) and Vic (15%). NSW sheep are loaded in SA or VIC and usually comprise less than 1% of the total. The number of voyages has been decreasing with only 43 sheep voyages in 2010 compared to 139 in 2001 (DAFF website).

While being held prior to shipping the sheep are introduced to a pelleted ration (usually three to seven days) similar to the ration they will eat on the voyage (which is usually less than three weeks).

The ships that deliver the sheep are capable of holding up to 135,000 sheep in regulated pen sizes and sheep density with defined feeding, watering, air change, lighting and management. Sheep are drafted into pens according to sex, age, weight and size. These aspects are controlled by the Australian Maritime Safety Authority (AMSA) in consultation with industry, government and the RSPCA. Prevention of Cruelty to Animals legislation applies for each state from which vessels depart.

The trade is often criticised for the perceived level of mortalities in transit. The industry has committed itself to continued minimisation of losses. In 2010 the mortality levels for sheep were 0.89% (DAFF website), whereas the level had been 1.34% in 2000.

Reasons for the live sheep trade The principle reason for the existence of the live sheep trade is simply the specifications set by the markets themselves. Live animals are required for religious festivals and the lack of refrigeration in some markets limits the carcase trade. Much of the meat product from exported live sheep is never refrigerated after being processed and is sold through fresh meat ("wet ") markets.

Detractors feel that the trade should be replaced by chilled or frozen meat forms. While it could be argued that this would ensure increased employment and flow-on effects in the meat processing industry nationally it should also be realised that live export has actually supported the growth in demand for meat products from Australia. This unfortunately is a slow process due to religious and cultural beliefs in many importing countries (where the slaughter of sheep is preferred) and because of the lack of refrigeration and storage infrastructure.

Religious festivals Ramadan Ramadan is the ninth month of the Islamic calendar. Islam uses a lunar calendar—that is, each month begins with the sighting of the new moon. Because the lunar calendar is about 11 days shorter than the solar calendar used elsewhere, Islamic holidays "move" each year. In 2012 Ramadan begins on July 20.

For more than a billion Muslims around the world Ramadan is a "month of blessing" marked by prayer, fasting, and charity.

Why this month? Muslims believe that during the month of Ramadan, Allah revealed the first verses of the Qur'an, the holy book of Islam. Around 610 A.D., a caravan trader named Muhammad took to wandering the desert near Mecca (in today's Saudi Arabia) while thinking about his faith. One night a voice called to him from the night sky. It was claimed the angel Gabriel told Muhammad he had been chosen to receive the word of Allah. In the days that followed, Muhammad found himself speaking the verses that would be transcribed as the Qur'an.

At many mosques during Ramadan, about one thirtieth of the Qur'an is recited each night in prayers known as tarawih. In this way, by the end of the month the complete scripture will have been recited.

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Fasting Muslims practice sawm, or fasting, for the entire month of Ramadan. This means that they may eat or drink nothing, including water, while the sun shines. Fasting is one of the Five Pillars (duties) of Islam. As with other Islamic duties, all able Muslims take part in sawm from about age twelve.

During Ramadan in the Muslim world, most restaurants are closed during the daylight hours. Families get up early for suhoor, a meal eaten before the sun rises. After the sun sets, the fast is broken with a meal known as iftar. Iftar usually begins with dates and sweet drinks that provide a quick energy boost.

Fasting serves many purposes. While they are hungry and thirsty, Muslims are reminded of the suffering of the poor. Fasting is also an opportunity to practice self-control and to cleanse the body and mind. And in this most sacred month, fasting helps Muslims feel the peace that comes from spiritual devotion as well as kinship with fellow believers.

Although Ramadan is the Islamic holy month when Muslims are prohibited from eating or drinking between sunrise and sunset, family and friends gather for large banquets after dark.

Eid al-Fitr Ramadan ends with the festival of Eid al-Fitr, which in 2012 occurs on August 19. Literally the "Festival of Breaking the Fast," Eid al-Fitr is one of the two most important Islamic celebrations (the other occurs after the Haj, or pilgrimage to Mecca). At Eid al-Fitr people dress in their finest clothes, adorn their homes with lights and decorations, give treats to children, and enjoy visits with friends and family.

A sense of generosity and gratitude colours these festivities. Although charity and good deeds are always important in Islam, they have special significance at the end of Ramadan. As the month draws to a close, Muslims are obligated to share their blessings by feeding the poor and making contributions to mosques.

Haj Around one million animals (including about 600,000 sheep) are slaughtered in Saudi Arabia alone over the four day Eid Al-Adha (feast of sacrifice), as part of the Haj period. The animals are slaughtered in one of the nine abattoirs run by the Islamic Development Bank (IRB), including the US$133 million Modern Abattoir, which can handle up to 70% of the total slaughtering.

The IRB is responsible for sourcing the stock and distributing the meat from the slaughter sheep, goats, cattle and camels to poor Muslims around the world. The IRB employ 40,000 butchers and officials, including 700 veterinarians to ensure the sacrifices are suitable for human consumption.

Regulation of the industry The livestock export industry is subject to a combination of government and industry self-regulation: • Shipboard programs involving stockmen training and allocation to voyages.

Government regulation of the trade includes: • The Australian Standards for Livestock Export v2.3 • Exporter licensing by the Australian Government Department of Agriculture Fisheries and Forestry (DAFF) and the Australian Quarantine Inspection Service (AQIS) under the Meat and Livestock Industry Act 1997. Export licences are only issued if the Australian Standards for Livestock Export developed by DAFF are met. • Export Certification administered by AQIS for each consignment under the Export Control Act • Ship Certification administered by the Australian Maritime Safety Authority- Marine Order 45 • State Animal Welfare and Protection of Cruelty to Animals Legislation.

Live sheep exports for breeding A relatively small number of live sheep are exported for breeding each year. Destinations include the Middle East, South America, China, Mexico, the Philippines and Indonesia.

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© 2013 The Australian Wool Education Trust licensee for educational activities University of New England Notes – Lecture 6 – Lamb and Mutton Markets 6.6 Lamb and sheep skins Skins are a valuable product of the lamb and sheep industry and contribute about 30% of the return from lamb. Figure 6.5 shows the trends in skin prices over the last few years. Table 6.2 outlines the traditional markets for lamb and sheep skins.

Figure 6.5: Trends in Australian sheep and lamb skin prices from 2003 (MLA Australian Sheep Industry Projections 2011).

Lamb skin prices are usually higher in July – September as manufacturers of sheep skin rugs buy their requirements for the entire year over a few months. In southeast Australia this coincides with the time when grass seed problems and ultra violet light degradation of the tip are at their lowest. Sheep skin rugs are a high value product exported around the world.

This seasonal buying focuses on unshorn second cross lambs with little colour or vegetable fault in the wool. Prices may not always be so high for first cross skins or at other times of the year but a few simple management guidelines can always be followed. These will ensure the value of skins is as high as possible at the time of slaughter.

The main factors affecting skin value are: • wool length • wool quality • seed and burr contamination • breed • dark fibre contamination • shearing cuts • skin weight and area • misuse of brands and markers • over crutching • free of faeces, dust and urine stain.

Table 6.2: Traditional markets for first and second cross lamb skins (Chris Shands and NSW DPI Colleagues 2006). Wool length Initial Product VM allowed Further End

(cm) process processing Product** Greater than 7.5 *fellmonger Wool *** spinning Woollen products Greater than 7.5 scour Woolly skins F tan Floor rugs unshorn 5.0-7.5 fellmonger Skin 1%B, 0%S tan Leather suede 5.0-7.5 fellmonger Wool *** spinning Woollen products 2.5-5.0 scour Woolly skin 1%B, 0%S tan Medical rugs seat covers 1.5-2.5 scour Woolly skin 1%B, 1%S tan Footwear Ug boots Less than 2.5 scour Woolly skin F, NF tan Wool coats

* Fellmongering is the chemical process of removing wool from a skin ** Except for some floor rugs, all woolly skins are trimmed to a uniform length/depth *** As for normal shorn wool B-Burr, S-Shive (seed), F-Free, NF-Nearly Free

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© 2013 The Australian Wool Education Trust licensee for educational activities University of New England Notes – Lecture 6 – Lamb and Mutton Markets 6.7 Ways to improve skin value Avoid pigmented sires. Black fibres in the fleece of lambs reduce the skin and wool value considerably. Even black fibres at the points reduce skin value.

Vaccinate. Vaccinate near the edge of the pelt (behind the ear for example) so that the blemish can be easily trimmed if necessary. Do not vaccinate at any other site.

Burrs and grass seeds. If possible, graze lambs in paddocks that are free of burrs and grass seed. To reduce contamination, consider using the management tool of spray topping of grassy pastures eg. barley grass, vulpia.

Timing. Consider changing time of shearing to before seed set to reduce seed contamination. Allow 10 weeks if possible before slaughter to ensure a commercial wool length.

Crutching. Avoid full crutching, or you could lose several dollars in skin value. A narrow crutch under the tail (a ‘bung-hole’ crutch) will maximise the skin value (Figure 6.6). Do not full crutch up and over the tail and well out onto the legs. It is unnecessary and substantially reduces the skin value.

Figure 6.6: Extent of crutching (Chris Shands and NSW DPI Colleagues 2006).

Pests. Control lice, flystrike, fleece rot and dermatitis to minimise matting of the wool.

Diet. Minimise faecal stain by controlling worms, and by avoiding sudden changes in diet.

Staining. Give lambs and sheep time to empty out before loading onto trucks, ideally this should be about 12 hours. This minimises pen stain during trucking.

Spray markers and raddle. These are used to identify sheep for sale and are best applied on the wig or nose of the animal, not the middle of the back. Lamb skins are processed at lower temperatures than that of wool scouring, so traces of the mark can remain on the processed skin.

Dust. During the autumn, in some parts of Australia, dust contamination in skins can cause quality assurance problems for processors. Try to minimise dust contamination on farm.

Estimated skin value Using the above information you should be able to contact skin buyers and check skin market reports to estimate skin values. WOOL412/512 Sheep Production ______6-9

© 2013 The Australian Wool Education Trust licensee for educational activities University of New England Notes – Lecture 6 – Lamb and Mutton Markets 6.8 Skin quality Wool length The majority of Merino skins are not processed into wool-on skins. This is due mainly to the poor quality of skins from older animals.

When sheep are being sold at times other than around normal shearing time, the decision must be made to either shear before sale or sell them in the wool.

If sheep are shorn before sale then the grower will be paid on the sale of the wool – but bare shorn pelts are worth very little.

Premature shearing yields less and lower value wool per sheep with shorter staple length. The value of sheep skins increase as wool length increases, so there is a point at which premature shearing becomes uneconomic compared to selling sheep in the wool.

Study market reports for skins and wool prices to establish the price for short staple wool.

The most appropriate shearing strategy can be decided using information from your past wool records and using current wool prices.

As a general rule it is unlikely you will recover the cost of shearing wool less than 50mm in length.

Crutching Ensure that sheep destined for market are free of faeces and stain. Bung hole crutch only, as over- crutching reduces skin value. This includes a blow inside the back legs but not a full crutch over the tail. Crutch lambs and sheep at least four days before sale to avoid stress. Do not send sheep for sale with unhealed or infected wounds.

Assessing sheep and lambs for grass seed contamination When marketing lambs or sheep that have had access to any areas of pasture that contains grass seeds that are likely to contaminate the wool, skin or carcase it is important to assess for the amount of grass seed in the wool. The most likely seeds to contaminate are those from native species such as wiregrass, spear grass/corkscrew, barley grass or crowfoot/geranium.

It is not possible to be totally accurate in predicting whether or not grass seeds have penetrated the skin and therefore the carcase, but assessing the animal to check for evidence and relative quantity of seed in the wool will be a reasonable indicator. Care should be taken to closely inspect the animal on the brisket, neck, shoulders, belly, legs and lower ribs (Figure 6.7). These are the most likely areas to retain seeds.

Shorn lambs or sheep may appear to be clean, but may have had grass seeds penetrate the skin or muscle prior to shearing. On inspection these will probably not be seen, so shorn animals should be considered in relation to their known grazing history. If they have been on pastures that have contained problem species and these have set seed during the grazing period, it should be considered that the animals might have some seed penetration.

Industry standards for the description of the level of seed contamination of the fleece were developed for Computer Aided Livestock Marketing (now AuctionsPlus) in the early 1990s. Quantity of seed observed can be indicated as either:

• None observed • Light (very few seeds on belly, lower points, and brisket) • Medium (moderate numbers of seeds on belly, brisket, flanks) • Heavy (obvious large number of seeds over most of the body).

When seeds of the problem species are seen, penetration of the skin or carcase is very likely.

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1. Brisket, shoulder, neck 2. Lower rib, belly 3. Hind leg, breech 4. Head

Figure 6.7: Seed Identification Points (Chris Shands and NSW DPI Colleagues 2006).

Spray markers and raddles. Identify sheep for sale by applying markers or raddles on the wig or nose of the sheep. Do not apply in the middle of the back as skin processors use lower temperatures than wool scourers, leaving traces of the mark on the skin.

Vaccination. Vaccinate behind the ear so a possible blemish can be easily trimmed from the pelt or the carcase. Do not vaccinate along the back, shoulder or inside the hind leg, as these are high value parts of the carcase and skin.

External parasites. Control lice, flystrike, fleece rot and dermatitis to maximise skin value.

Curfew times. Keep sheep off feed and water for at least 12 hours before trucking to minimise faecal staining in transit. If coming off very lush feed consider feeding good quality hay for two days before loading.

Readings There are no readings for this lecture.

References ABARES 2011 Australian Commodities March quarter 2011, Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), Canberra, ACT Athas, S. 2011 MLA Australian Sheep Industry Projections 2011, Meat and Livestock Australia, available from http://www.mla.com.au/Prices-and-markets/Trends-and-analysis/Sheepmeat- and-lamb/Forecasts DAFF 2011 Australian Standards for the export of livestock v2.3, available from http://www.daff.gov.au/animal-plant-health/welfare/export-trade/livestock-export-standards

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