Trade

Lamb new supermarket price battleground

Beef Central, 19/08/2012

 

Lamb has re-emerged as a domestic supermarket retail price battleground.

Woolworths from this morning slashed its lamb leg prices by $4.50/kg to $8.99/kg, closely matched by Coles, which cut its price by $5 to $9/kg for legs.

Back in January, Woolworths for a period offered $10 off lamb legs, as part of the tit-for-tat retail war that started back in late 2010 with beef, and later drifted in milk, bread and other staples.

Lamb prices have been drifting downwards over the past 12 months, monthly Neilsen Australia Homescan survey data shows, following a decline in domestic lamb consumption during earlier record high prices.

The current overlap between new spring season lamb and older lambs from the previous lamb-drop has been blamed for providing a surplus, making current discounting easier to justify for the big two supermarkets. Some lamb producers had also kept last season's lambs longer due to an abundance of feed.

Historically, lamb supply is still tight, however, according to MLA’s recently-released half-year industry projections.

Woolworths says its cut-price lamb legs will be offered for the next four weeks. A Coles spokesman said the move would provide customers with great value lamb through to Christmas, with price cuts varying by state and by week.

Woolworths fresh food general manager Pat McEntee said as more high-quality, new-season lamb came into supply, Woolworths would be offering customers more deals on other popular cuts.

From Monday, lamb cuts will be up to $8/kg cheaper, in some cases returning to supermarket prices not seen since 2003. Mid-loin chops will be more than 30pc cheaper, while cutlets and rump steak will be discounted 20pc.

Domestic lamb sales have declined by 25pc over the past ten years as prices spiralled due to short supply and a booming export market. Lamb overtook beef as the most expensive meat 18 months ago, according to Neilsen Homescan, as Australian sheep flocks hit their lowest levels in almost a century due to drought and poor wool prices.

One report suggested the lamb price discount move would cost Woolworths about $13 million in the next year. The supermarket giant said it expected cheaper lamb prices to boost sales by up to 20pc.

MLA chief economist Tim McRae in his recent lamb industry half-yearly projections said the combination of price and good seasons that had driven expansion in the Australian lamb and sheep industry over the last two years had eased during the first half of 2012, as additional lambs and softer export conditions brought prices back from historically high levels.

“Lamb and sheep prices over the last two years were unprecedented – driven by lower Australian and NZ supplies and restocker demand, fuelled by excellent seasons in most areas of Australia,” Mr McRae said.

“After falling to record lows at the tail end of the drought, the Australian sheep flock is now expanding again, estimated to have increased 2.6pc in 2011-12, to 75 million head,” he said.

Despite the lamb price fall, overall returns for slaughter lamb producers in 2012 and 2013 should continue to be favourable, underpinned by reasonable prices and higher turnoff rates, MLA said in its half-year forecast.

The US remains a key destination for Australian lamb, with exports forecast to reach 35,000t in 2012.

However the fastest growth market for the first half of 2012 has been the Middle East, with exports jumping 57pc to 22,167t. The positive conditions for Australian lamb to the Middle East are expected to continue for the remainder of 2012 and 2013, with shipments forecast to reach 47,000 tonnes next year.

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