Year: 2019

The Australia Day holiday saw an interrupted week for lamb sales but prices were relatively steady for finished crossbred lambs. Though, we did see some interesting price movements for restocker and Merino lambs, as well as the Mutton indicator, which might be a preview of things to come.

Some large yards sell lambs on Monday’s so this week’s indicators could change a little come next week. It was, however, good to see the Eastern States Trade Lamb Indicator (ESTLI) move past Australia Day without falling further.

Regular readers will remember that lamb prices are usually strong in early January as lamb demand ramps up. This year processors were well prepared and booked stock early, only to see supply match demand and lower prices than expected. In the past we have seen prices fall in February as demand weakened, this year a supply drop might match it.

The steady finished lamb prices seem to be dragging restocker price expectations back. Figure 2 shows that restocker lamb prices are at their lowest level since August, as those finishing lambs adjust their buy price to reflect the finished lamb prices on offer.

Merino Lamb prices have done the opposite. Figure 3 has Merino lambs hitting a three month high.  Supplies of Merino lambs are likely to be getting thin, and maybe demand is picking up as those looking for restocking opportunities like the look of the wool value.

Mutton markets have also recovered with the National Mutton Indicator nearly back at 400¢. Still at a heavy discount to lamb, mutton has plenty of upside with some improved seasonal conditions.

Next week?

We would think the supply side of the lamb market should start seeing prices creep higher. We are already seeing a dearth of heavy lambs and we know from history that fewer heavy lambs soon translates into fewer trade lambs. Especially when feed is expensive.

In the Friday sheep market comment we noted the lack of Heavy Lamb across NSW sale yards since the start of the season. This analysis piece looks at the other two key mainland states across the East coast to see if the pattern of Heavy Lamb throughput is being replicated.

Recap on the Friday Sheep market comment here.

Heavy Lamb yarding levels in NSW have averaged 25,750 head per week since the start of the season. Compared to this time last year NSW Heavy Lamb yarding was averaging over 42,000 head, so we are running nearly 40% below the 2018 pattern. Measuring the volumes across the last five seasons shows that Heavy Lamb throughput in NSW for the same time frame is around 33,600 head, which puts the current sale yard volumes 24% under the long-term seasonal average – Figure 1.

Victorian sale yards have been displaying a similar pattern with the current year’s volume averaging 14,226 head per week compared to nearly 21,000 head in 2018. Although not as severe a difference than in NSW it still represents a drop of 32%. A comparison to the longer-term average over the same period shows Victorian Heavy Lamb yarding levels averaging over 16,600 head per week putting the 2019 pattern nearly 15% below the five-year average – Figure 2.

The story is the same for South Australian throughput levels too, and despite the absolute yarding figures in South Australia being lower than Victoria and NSW, the magnitude of the decline in yarding volumes are like what is being experienced in NSW.

In South Australia Heavy Lamb numbers at the sale yard averaged 2,760 head per week compared to just over 4,800 head in 2018, a drop of 43%. The 2019 pattern for the five-year seasonal trend is also below average running 37% under – Figure 3.

What does it mean/next week?

Given the tough trading conditions last season and the move to flock liquidation due to the dry spell its unsurprising to see the lack of Heavy Lamb in these states. It’s likely to see Heavy Lamb prices remain well supported while the supply remains soft.

Furthermore, it won’t take much to see a kick on in lamb prices should we start to see a more favourable turn around in weather conditions as we head toward the Autumn.

Key points:

• Victorian and South Australian sale yard throughput levels for Heavy Lamb are mirroring the reduced supply being experienced by NSW.
• Victorian Heavy Lamb numbers are running 15% below the five-year seasonal average.
• South Australian Heavy Lamb numbers are more pronounced, trending 37% under the five-year seasonal average.

The Eastern States Trade Lamb Indicator (ESTLI) managed to climb 3.8% this week and East coast mutton wasn’t far behind, registering a 3.6% gain, as lighter throughput compared to this time last season lent some support to prices.

East coast Restocker lamb was one of the few categories to register a price drop, easing 2.3% as heatwave conditions sapped the buying enthusiasm out of restockers to see it close the week at 649¢/kg cwt. Merino lamb was the only other NLRS reported category along the East coast to suffer a price fall, albeit marginal at 5¢, to end the week at 620¢ (Figure 1).

Late last year we mentioned the prospect of a supply gap surfacing early into the new year and going by the price behaviour of heavy lamb this week, the star performer gaining 4.3% to 673¢, we could see the beginnings of a supply squeeze for heavy lamb.

Early throughput data for NSW Heavy lambs shows saleyard volumes for the first few weeks of January are trekking 40% below the 2018 pattern and 25% below the five-year average level (Figure 2). It would be interesting to see if this is being replicated across other states and probably worthy of a look in one of our sheep market analysis pieces for next week – keep your eyes peeled for that one.

Lower than average volumes also seemed to help give the ESTLI a leg up this week with a 26¢ boost to close at 677¢/kg cwt. East coast lamb throughput levels are running 28% lower than for the same period in 2018 and 17% under the five-year seasonal average since the start of 2019 (Figure 3).

What does it mean/next week?:

There is some very light rain forecast for southern parts of the country next week, but not enough to really get a rocket up lamb and sheep prices. A more likely scenario will see prices respond to supply volumes, with continued weak supplies helping to support gradual price gains.