As the agriculture sector prepares for winter, a major export deal with China and improvements in trade relations with Russia are heating up prospects for Mongolia's meat industry.

A meat trade agreement to send 8 million sheep to China in the next three years was signed between Ulaanbaatar and Beijing in late November. Local media has reported that advances in Mongolia's hygiene standards made the deal possible, and Russia has lifted its quarantine on meat imports. Mongolian meat exports rose by 32.9 percent year-on-year (y-o-y) in 2010, an increase of 23,800 tons compared to 17,900 tons a year earlier. Mongolia's 112.8 million hectare of pasture land leaves it well placed to capitalize on meat exports and related sectors. Global meat supplies will likely tighten further in 2012, keeping prices high.

While some countries suffered meat shortages due to rising prices, Mongolia had issues with overproduction. Between 85 percent and 95 percent of Mongolia's annual meat production is consumed domestically, and the price of what is available for export is some three to four times lower than Australian exporters. A February 2011 report by the U.N. Industrial Development Organization (UNIDO) found that while the global market would “easily” absorb this amount, the domestic industry was limited due to “production difficulties and food safety issues.”

The UNIDO recommended Ulaanbaatar focus on adding value to its meat products packaging animal carcasses to suit retailers' needs. It also said the country should explore emerging markets for lamb meat demand, such as in the Middle East. The lack of steroid and additive use in animal husbandry, with no hormones or chemicals in feed, also enhances value, but the government must obtain organic certification first.

Another challenge to the sector is the country's notoriously harsh winters. Especially cold winters with heavy snowfall referred to as dzuds can cause disastrous losses, as happened in the winter of 2009 and 2010 when herders lost as much as 70 percent of their livestock. The World Bank has recommended that the government establish emergency facilities for such cases.