The Lamb Chop Boom
Forget gold and oil. Investors looking to beat the recession in the next decade might want to consider hitting the open range and starting a sheep farm. In 2010, Australian rams began selling for more than $100 a head for the first time in history as dwindling stocks sent mutton prices soaring. The U.N. Food and Agriculture Organization is forecasting a 300,000-ton shortage in the global lamb supply over the next five years. That's bad news for the growing number of consumers in the Middle East and Asia with a taste for lamb, but a windfall for long-struggling farmers in Australia and New Zealand, the world's two largest sheep producers.
Several factors account for the global sheep shortage. Farmers in the United States have largely gotten out of the ovine game, and the country's stock has fallen from 64 million sheep to just 6 million since the end of World War II. British farmers have also cut back on sheep production since the 2001 hoof-and-mouth scare. In Australia, falling wool prices in the 1990s and crippling droughts hit the industry hard.
At the same time, global demand for sheep meat has grown along with the glittering wealth of the Persian Gulf -- Saudi Arabia and Kuwait alone now account for more than half of Australia's sheep exports. In the lead-up to Ramadan, with its traditionally sheep-centric iftar feasts to break the fast, Australian sheep prices go up each year by as much as 77 percent.
Australia's sheep stock has now fallen to an all-time low -- around 71 million head. Sheep once sold for as little as 50 cents each during a glut in the 1980s, but today some breeds of ewe can sell for as much as $200 a pop. In Britain, lamb prices have increased as much as 20 percent this year, and in Saudi Arabia, this year's sheep shortage led to increased demand for beef and camel meat. With more sheep for dinner and fewer for sweaters, wool prices also hit a 14-year high over the summer.
Australia and New Zealand still dominate the world sheep trade, though China is gaining quickly. But because sheep can take years to raise and are expensive to maintain, the global market is unlikely to respond to the increased demand anytime soon. The future, for these countries, is looking mighty woolly.
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