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Commodities

Japan's sheep meat import prices remain high despite coronavirus

Chinese demand grows, while Australian supply drops amid droughts and fires

Most of the mutton consumes in Japan is imported meat.

TOKYO -- Japan's import prices for sheep meat remain stuck at high levels, even as prices for many other types of meat coming from abroad are falling due to a slump in the food-service industry's sales amid the novel coronavirus outbreak.

Sheep meat import prices between January and February this year were up nearly 10% from the same period last year and at the highest level on record amid a tight supply-demand balance, as Chinese demand is expanding while supply from Australia, a major producer, is shrinking.

Because of strong medium- and long-term structural factors, sheep meat import prices show no sign of dropping, despite the pandemic and are likely to remain high for the time being.

Japan imports the bulk of the sheep meat consumed domestically, with more than 90% of it coming from Australia and New Zealand.

According to trade figures from the Finance Ministry, sheep meat import prices stood at around 980 yen ($9.08) per kilogram between January and February this year, up 9% from a year earlier.

Sheep meat import prices between January and February rose for the fourth in a row on a year-on-year basis and reached their highest level since comparable figures became available in 1988.

Sheep meat import prices stood at 940 yen per kilogram between January and February in 2019. They have surged by 1.9 times over the past decade.

Increasing demand from China, where sheep meat is used in hot pot and many other dishes, has pushed up import prices. China is boosting sheep meat imports as domestic production cannot keep pace with consumption.

The spread of African swine fever, or ASF, has also hit China's pork industry since the spring of last year, spurring the higher sheep meat price. Because of ASF, China has increased meat imports in general, resulting in a tight supply-demand balance.

China's aggressive sheep meat purchases have slowed slightly since the start of this year, due to the coronavirus outbreak. But they are now starting to grow again as the infection of the virus appears to have peaked in the country.

Japanese trading firms said that the country's sheep meat import prices had continued to hover at high levels since March.

In Japan, imported meat is widely used at food-service outlets. In stark contrast with sheep meat, imported prices for other types of meat such as beef and chicken have all declined due to the new coronavirus outbreak.

A decline in Australia's supply has also contributed to keeping Japan's sheep meat import prices high.

Australia's sheep meat production is on a downward trend due to massive droughts and forest fires. According to Meat & Livestock Australia, the number of sheep raised in the country sank 6.5% in 2019 from a year earlier and is predicted to slide again in 2020 at a pace of 3.5%.

The weather is also a factor in the continued elevation of sheep meat prices, despite the food-service industry's weaker sales globally due to coronavirus.

When they face a drought, Australian farmers tend to bring forward meat shipments, because grass, which is food for sheep, does not grow. On the other hand, if they have ample rainfall, they tend to delay shipments in order to fatten up the animals.

After being hit by a spate of droughts since 2018, Australian farmers have had plentiful rainfall since the beginning of this year, resulting in a temporary decline in shipments.

Furthermore, there are also concerns about the future procurement of sheep meat.

In Australia and New Zealand, workers are required to keep their distance inside meat-processing factories to help prevent the spread of COVID-19. "It could affect imports in May and beyond because of a decrease in production efficiency," one Japanese importer said.

An official at a Japanese food maker also said, "We are not selling sheep meat aggressively in anticipation of difficulties in procuring it."

Because of an increase in sheep meat prices, business operators handling packages of meat and sauce for "Jingisukan (Genghis Khan)," a barbecue dish using mutton or lamb and vegetables, in Hokkaido are in dire straits.

The dish is particularly popular on the northernmost Japanese island prefecture.

Expressing a sense of crisis, one maker of such packages said, "We are coping with the situation, including by increasing sauce in the package while reducing meat. If high sheep meat prices continue, there will be a shakeout of small and medium-size companies."

The Tokyo metropolitan area has also seen a boom in demand for lamb. But people are currently avoiding going out due to the state of emergency declared by the Japanese government over coronavirus, meaning headwinds for Tokyo restaurants specializing in lamb -- some of which have seen sales tumble by as much as 90%.

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