Sheep need the Dismal Science

Economics is known as the dismal science, a term coined by Scottish writer, essayist, and historian Thomas Carlyle to describe the discipline of economics.

Dismal science is said to have been inspired by Malthus' 1820 gloomy prediction that population would always grow faster than food, dooming mankind to unending poverty and hardship. 

It was a good theory, unfortunately he did not factor in the potential of science and innovation to produce food faster than people. He also forgot to factor in the impact of government intervention into the market, that equally has the potential to doom mankind to unending poverty and hardship.

No doubt some growers would be feeling that the government’s policies on live exports are dooming them to unending poverty and hardship, despite growing demand for their product.

It’s hard to not conclude that government decision making here and abroad has, in part been responsible for driving sheep prices down to their current rock bottom levels, be it through the Federal governments summer shipping bans, the Qatar Airlines decision, big leaps in the minimum rates of pay for Pacific Islanders working in abattoirs, climate change policies pushing up the cost of power and refrigeration, or just the axe the Federal government is holding over the head of the industry.

To the Australian government stupidity, you can add the Chinese government’s COVID decisions that crunched their economy (our biggest market for frozen mutton), Biden’s handling of the US economy (impacting our high end lamb market), the Saudis refusal to have Exporter Supply Chain Assurance System (ESCAS) imposed on them, the removal of subsidies for sheep meat in the Middle East, the tariffs in India and Pakistan, the list goes on.

How much each of these factors has contributed to the drop in sale yard prices versus the poor seasonal conditions is something all growers need to understand, as without knowledge of what’s driving the market, growers are flying in the dark when it comes to decisions to keep, destroy, or sell excess stock when prices are low.

The one area that government can help is through playing the role of independent market analyst. Government agency’s such as the Australian Bureau of Agricultural and Resource Economics (ABARES) and the Department of Foreign Affairs and Trade (DFAT) play a key role in putting together the statistic facts and trade information needed by everyone from Meat & Livestock Australia (MLA), Department of Primary Industries and Regional Development (DPIRD), to the traders, consultants and farmers so they can build a picture of what’s happening in domestic and international markets.

Data on how many sea and airfreight containers are moving, the cost of container freight, frequency of shipping, capacity at ports of embarkation, freezer capacity, availability of labour, cost of processing, domestic market demand, international market demand, competitor volumes, trade restrictions etc.

The economists at DPIRD have recently done some interesting work looking at where the supply chain blockages occur, and interestingly our abattoirs are cranking up their capacity to record levels with lamb and sheep slaughter well up on last year. But domestic and international freezer capacity is maxing out and the buyers are not buying, which begs the question why?

We have high prices for oil in the Middle East, so they are not short of coin. Americas economy has bounced to 3% growth.  But where are the buyers?  Who’s not buying what?  What are the price points when the Middle East look to Sudan and Romania?  Is live sheep linked to boxed sheep, don’t supply one and they won’t buy the other?  How big can the UK market get? What impact is the fall from 8kg a head of lamb consumption per Australian per year in 2000 to 5kg today had on the local demand when our population has increased 7 million?  What role do Coles and Woolworths play, why are they not building a market for mutton or are they only interested in making margin from high priced lamb?

What about the Americans who currently consume 600g per year and rising, are they on track to hit hit 1 kg in the near future and push up global demand?

Well-funded research divisions within our trade departments are worth their weight in gold, but they are continually being starved of funds, leaving our farmers increasingly in the hands of the traders.

Fortunately, our State Minister for Agriculture understands this, as she has been involved in the wine industry and knows the importance of independent market information.  The fact is no wine, sheep, wool, meat trader etc is going to open their books and tell you what they know, but government departments can pick up trade trends via export data that is invaluable to growers. Which is why we need to have well-funded government agencies full of dismal scientists.

As for my two bits worth on what’s happening in the sheep market. From the information I can gather, I suspect our biggest blockage is we simply can’t get enough boats here to load sheep, which can be purchased for record low prices.

Why? Is a good question to put to the Federal Minister for Agriculture?  He’s a smart operator, given the job of selling a dog of a policy which no doubt the government is regretting. I suspect he knows his government has scared off the trade at the worst possible time, but he can’t be seen to admit it.

With the major Muslim festivals of Ramadan and Eid-ul-fitr scheduled for March and April 2024, there is a major opportunity to put an additional 500,000 sheep out of WA on 8 boats and ship them to the Middle East.    

So, a bit of advice to the Federal Minister for Agriculture, use the activist’s argument of animal welfare against them, as a reason to delay any announcement of the end of the trade. There is a strong case to be made to round up the boats and bring in as many as possible over the summer to address the looming drought.

Throw in some lines on the protecting soil carbon card and climate change, that always seems to pacify the activists. 

In the meantime, man up and take a trade delegation via Qatar Airlines to the Middle East to work on rebuilding relations and opening doors to the huge Saudi Market.