Category: Lamb

It’s an age old question, and one that is rarely put through a rational economic test.  It’s probably of more interest to school children on farms than farmers.  But with four mismothered lambs currently residing in a small enclosure in our yard, I thought it was time to work it out.  Is it actually worth bottle raising stray lambs?

Any sheep breeder who goes around ewes would have found mismothered lambs.  Most are left in the hope that the mother will come back and pick them up, but we know that even in the best managed twinning mobs this doesn’t always happen.

So the kids want a pet lamb, we buy a bag of milk powder and get going on raising the most expensive lamb on the property.

We paid $58 for a 10kg bag of Maxcare lamb milk replacer.  It is mixed at a ratio of 190g which makes a litre of milk.  Can you believe this comes to $1.11 per litre.  That’s right, powdered lambs milk is more expensive than supermarket milk.  It probably reflects the actual value, rather than being used as a loss leader.

The recommended feeding rates are shown in figure 1, along with the cost per day and week of feeding.  Over the 34 days of milk feeding, lambs should reach a weight of 12-18kgs at a cost of $40.57.  This doesn’t include labour, as all farm kids know their labour is free.

Even 18kgs liveweight is a very light lambs, and is at the lighter end of where lambs are normally weaned.  Lambs will need to be weaned onto high quality pasture or hay and pellets to keep them growing at a reasonable rate.

Pellets and hay at 300g per day for a month will add another $5-10 in costs for another month which would get the lambs to a saleable weight of 18-22kgs.  Not many bottle reared lambs will be sold at this age or weight, but kids might can ask mum and dad for $60-90 per head depending on breed, based on what very light lambs are making on Auctionsplus at the moment.  The best lambs to rear are first cross or maternal ewes.

What does it mean/next week?:

The numbers show that there is a little bit of money to made in bottle rearing lambs if you don’t take labour into account.  Currently as lambs move up the weight scale their value increases strongly, but the rational economist would wonder why you would rear a lamb to 20kgs when you can buy them for $60.  Obviously you can’t just buy one lamb very easily or this cheaply.

You can tell the kids that if they can rear a lamb there is likely to be $10-30 in it for them, but maybe don’t tell them which are the best lambs to rear, or they might start chasing ewes away in first cross or maternal twinning paddock.

Key Points

• There are a lot of lambs reared on bottles, but it’s a costly exercise coming at around $40 for milk.
• Further high quality feed is required to get lambs to saleable weights, but there is a small profit in it before labour.
• Obviously rearing ewes is a more profitable exercise, but mismothered lambs can’t always be chosen.

A little bit of precipitation seemed to go a long way this week. Lamb prices jumped for all east coast categories, with the restocker lamb surprisingly doing the most. Meanwhile, heavy lambs smashed through another milestone, next stop $10.

There was some rain about in northern NSW, but it was in Victoria where restocker prices ramped up significantly. Figure 1 shows the National Restocker Indicator gaining 25% this week to hit a new record of 877¢/kg cwt.

In Victoria, the restocker lamb Indicator gained 33% to break through the 900¢ level and hit 938¢/kg cwt. For a 35kg lwt lamb, this equates to $146/hd with a $5 skin. It was only the start of July when we were getting excited about receiving $146 for 20kg lambs.

Restockers buying these expensive lambs will be okay if they are still getting $200 for 22kg cwt lambs, but looking at the forecast rainfall map (released yesterday), one might be inclined to take the great money for store lambs.

The best chart we have seen this week is Figure 3, with the symmetry of the declining lamb slaughter and rising sheep slaughter. Lamb slaughter was at its lowest full week level for five years and sheep slaughter at its highest level since 2014.

Despite the strong slaughter, mutton values rallied this week. The east coast mutton indicator gained 27¢ to 470¢/kg cwt. Processors aren’t making money on lambs, and while they might not be making money on sheep, they are losing less. Hence the extra demand for sheep.

What does it mean/next week?:

Is the next stop $10?  Well, it’s not impossible as the supply of heavy lambs isn’t going to ramp up any time soon.  At this time of year, it’s hard to see a grower with lambs at 45-50kg lwt worth $200 having the courage to hold them for another six weeks to get them to $300 lambs.

It will be the sheep markets turn to rally next, if and when it does rain there will be a supply squeeze like we haven’t seen since 2013.

While there is plenty of conjecture in Canberra today as to who is leading the country, at least it’s clear in the livestock market. This week the leader remained the same, Heavy Lambs.  In NSW in particular, where buyers paid over 900¢. 

That’s right, NSW Heavy Lambs this week averaged 910¢/kg cwt! With this price being the average, obviously half the Heavy Lambs in NSW made more than this. The National Heavy Lamb Indicator (Figure 1) is an extraordinary 271¢ higher than this time last year. And the price back then was pretty good too.

The good news is that the weakening Aussie dollar continues to take the sting out of price rises in US and export market terms. Figure 2 shows the ESTLI in US¢ just tipping over 600¢. Still not as high as in 2011, and ‘only’ 27% above the same time last year.

All sheep markets managed to gain ground this week. There is a bit of rain on the forecast, and spring is just around the corner in areas that have had rain. Perhaps demand for restocker lambs is on the improve. This week the east coast restocker lamb rallied 37¢ to 696¢/kg cwt.

Mutton prices also had a marginal improvement, gaining 13¢ in the east, to 443¢. In the west, mutton eased 22¢ to 418¢/kg cwt.

As noted last week, lamb prices in the west are well behind their east coast counterparts. Heavy lambs were up 50¢ and making 726¢/kg cwt. Not 900¢, but a very good price nonetheless.

What does it mean/next week?:

The forecast rainfall won’t see finished lamb supply increase in the short term. If it’s not followed up, it won’t see finished lamb supply increase at all. We are still at least 8 weeks away from sucker lambs from wetter areas hitting the market, so it’s hard to see lamb prices falling far in the short term. The forecast rain and some follow up, would make interesting times for mutton markets. It’s hard to see where the slaughter sheep would come from.

After the extraordinary price moves of last week, the wool market seemed to be in a grumpy mood with across the board retreats in prices at the 2-day Melbourne and Sydney sales.

The Eastern Market Indicator (EMI) fell back from the start and never recovered, losing 48 cents for the week, to settle at 2068 cents Au$ (Figure 1).

The Au$ played a part in the falls by improving almost 1 cent for the week to 73.4 cents, causing the EMI to fall to a lesser degree in US$ terms, closing at 1519 US cents, down 18 cents on the week.

Sellers reacted strongly to the price pull-back, passing in 10.8% of the offered bales resulting in a clearance to the trade of 26,499 bales. This is the lowest clearance of bales since June, with the season weekly average now sitting at 36,600 bales, down from the last season average of 39,200.

This resulted in a dollar value for the week of $63.5 million, with a combined value of $415.66 million so far this season.

Again, this week in a softer environment buyers were selective. Last week small faults were ignored as buyers sought to secure quantity, but this week they were again discounted, at times severely.

Skirtings and Crossbred wool also tracked downward according to AWEX, giving back much of last week’s gains.

Merino Cardings bucked the trend to post modest improvement on limited offerings, however, Melbourne was quoted down 24 cents.

This week is the annual Wool Week conference in Melbourne (hence the Tuesday/Wednesday sale), where all participants come together. No doubt there will be a lot to discuss concerning demand, supply and price. While this week was somewhat sobering after the strong lift last week, in the context of long-term prices these levels are still at the very top.

Concerns regarding supply are coming through from processors, the drought and the sell down last year of virtually all wool held in stores, has led to a forecast of reduced supply in the coming season.

Next week Fremantle returns to the roster, with all centres selling on Wednesday and Thursday. The Sydney sales are designated Australian Superfine Sales. An increased offering of 34,960 bales is rostered, and the following week, a lift again to 37,280 bales.

After finding some solid resistance at 800¢ earlier in August, it looked like lambs stellar run was finished.  This week the market came back to life, with new highs set in heavy and trade lamb markets.

Figure 1 shows the Eastern States Trade Lamb Indicator (ESTLI) posting a 52¢ rally to hit a new record high of 813¢/kg cwt.  With the ESTLI sitting a massive 219¢, or 36% above the same time last year grower who can supply finished lambs are being very well rewarded.

Trade lambs have broken through 800¢, but heavy lambs are remarkably closing on 900¢.  The eastern Heavy Lamb Indicator is just shy of 300¢ higher than last year, at a crazy 876¢/kg cwt.  It’s no surprise that Wagga set a new record this week, with a pen of lambs selling for $305 per head.

This week’s price rally was due to further tightening in supply.  Figure 2 show east coast lamb slaughter hitting a two year low for a full week, slipping under 300,000 head.  We can see in figure 2 that lamb slaughter usually starts to ramp up this time of year.  The dry weather is playing havoc with normal seasonal trends.

Despite, or perhaps because of, the better seasonal conditions in the West, the WA Trade Lamb price lost 29¢ to sit 663¢/kg.  Still a great price, but just 150¢ behind east coast values.

Mutton prices continue to languish as heavy supplies of sheep come to the market.  It’s good to see ‘drought’ sheep prices at 430¢/kg cwt.  It’s not that long ago that sheep were making less than $4 per head during drought.

What does it mean/next week?:

The Bureau of Meteorology (BOM) yesterday released their 3 month outlook (figure 3).  Again it’s a bit depressing, but it’s now forecasting dry weather for the southern areas which are currently experiencing normal seasons.

A dry spring in key southern lamb areas would be likely to add to the supply of store lambs, and continue to limit the supply of finished lambs.  If it is indeed dry, hopefully some rain in NSW might offset some of the supply issues.

A fall in the Au$, alongside a reduced offering and the prospect of a further reduction in the offerings into the future, conspired to create an almost frenzied wool market this week.

The Eastern Market Indicator (EMI) rose strongly from the start and never looked back, gaining 126 cents for the week, to settle at 2116 cents AU$ (Figure 1).

On the first day of selling, the EMI set a new record for the largest daily rise, increasing 99 cents. This lifted the EMI above the previous record high of 2,073 set in June this year.

The EMI was stronger but slightly more subdued in US$ terms, closing at 1,537 US cents, up 56 cents on the week.

AWEX reported that the main drivers of the rally were the reduced offering, concerns about future supply and the benefit of a lower Au$. This is in line with the general explanation of the very good market levels, however, there is also the cyclical effect on the wool market (we are in a super-cycle), as well as a growing appetite for wool from activewear and luxury products. Whatever the reasons, wool producers are in for another good wool cheque for their next wool clip.

Sellers embraced the rally, passing in only 1.5% of the offered bales resulting in a clearance to the trade of 35,759 bales. Of note is that this clearance is 13k bales less than last week, and next week the roster is 6.5k bales fewer again.

This resulted in dollar value for the week of $87.3 million, with a combined value of $352.1 million so far this season.

Previously we have reported that better style wool has been more keenly sought and lower styles sometimes overlooked, this week small faults were ignored as buyers sought to secure quantity.

Skirtings and Crossbred wool didn’t miss out. After struggling to find support last week, Crossbred types increased across the board of 60 to 90 cents, recovering all of last week’s falls.

Merino Cardings also improved on a limited offering with all centres closing higher and above the previously unheard of 1500 cent level.

The week ahead

Next week only Melbourne and Sydney are listed to sell.

A look ahead shows that roster offerings are declining, with 29,800 bales listed for next week and 34,400 for the following week when Fremantle resumes.

As one analyst said when asked what the market will do next; “who knows, we are in unprecedented supply and price conditions”.

For what it is worth, we think that in the absence of further currency falls the market will steady next week and could in fact ease albeit slightly.

The first quarter of 2018 was characterised by above normal price behaviour for many categories of lamb and sheep in Western Australia when compared to the Eastern markets. However, uncertainty surrounding the live sheep export trade has seen the situation reverse since April, placing WA producers at a distinct price disadvantage to their Eastern neighbours.

In early April disastrous footage of a live sheep export vessel from 2017 aired on commercial TV prompting a government review of the trade, undertaken by Dr Michael McCarthy, that was delivered in May. After the McCarthy review, some recommendation were put in place immediately and others have been scheduled for further investigation.

In June, the exporter identified in the footage had their license suspended and another exporter announced they would temporarily cease exporting from Australia after considering the new export requirements put in place from the McCarthy review. These two companies are recognized as the top two exporters of live sheep from Australia and the result of their exit left sheep stranded in transit in WA and producers in a bind.

Analysis of the price relationship between categories of WA lamb and sheep compared to their Eastern state counterparts shows that after experiencing above average prices for much of the first quarter of 2018 the spreads have been in steady decline since April. WA Trade Lamb dropped from a 50ֶ¢ premium to the ESTLI in April to a 125¢ discount by the end of July (Figure 1).

The reversal in spread behaviour for WA categories for lamb and sheep wasn’t confined to trade lambs. WA Restocker Lambs have dropped from a 50¢ discount spread in April to a 300¢ discount spread, WA Light Lambs declining from a 25¢ premium spread to a 170¢ discount and WA Heavy Lambs from a 50¢ premium spread in April to nearly a 150¢ spread discount during July (Figure 2).

WA mutton also experienced a significant turnaround in spread behaviour across the April to July timeframe with a widening in the discount spread by over 200¢ (Figure 3). Indeed, for nearly all categories of WA lamb and sheep, the spread has transitioned from trending above the normal seasonal range to languishing below the normal range as the situation for live export sheep out of WA became more uncertain.

*In recent weeks the team at Mecardo have become aware of suggestions that our live sheep export analysis and reporting has been funded by live exporters and is therefore biased. This is incorrect. Our analysis is backed by data from trusted sources, like MLA, ABS, ABARES, etc, and Mecardo website publications are not funded by anyone other than our subscribers. 

In late April Mecardo were commissioned by WA Farmers (WAFF), with the support of Sheep Producers Australia, to produce a short report on the live sheep export trade. The report was clearly labelled as to whom funded the project and is available on the WAFF website.  For the record Mecardo has not received any payment from live export companies, nor their representatives, for any live sheep export related analysis or report produced.

What does it mean/next week?:

The reversal of fortune for WA sheep and lamb producers certainly coincides with the timing of all the uncertainty around the live export trade. In terms of annual offtake in WA live sheep exports contribute around 30% of the available outlet for turnoff and the disruption to the trade, with the two biggest exporters not currently participating, seems to be having an impact on prices and spreads.

Key points:

• WA markets for lamb and sheep have seen price spreads between Western and Eastern markets turn unfavourable for WA producers since the start of the live sheep export issues in April 2018.
• MLA reported categories of WA lamb and sheep have seen saleyard price spreads move adversely for WA producers by an average magnitude of over 200¢ from April to July.

The wool market opened after the winter recess with what appeared early to be a negative sentiment on the back of an increased offering. This didn’t last long, as by the end of the week buyers were keen to purchase and pushed the market above the previous close.

The Eastern Market Indicator gave away 25 cents on the first day, however by the end of sales had picked up 9 cents above the previous sale close to settle at 1,990 cents AU$ terms (Figure 1).

The EMI was also stronger in US$ terms, closing at 1,480 US cents, up 18 cents on the week.

When we thought that perhaps the wool market would settle down into maybe a declining market after the extreme ride that occurred pre-recess, in fact, the result this week suggests that we may not have seen the last of this “Bull” market.

Sellers began the week reluctant to follow the market lower, but by the end of the week, there was a positive tone, with a total of 4.7% passed in for the week.

An offering of 49,415 bales resulted in 47,0176 bales sold, a solid clearance for the resumption of sales.

A couple of notes from AWEX caught the eye; early in the week, the better style wool held in the face of a softer market, while lower quality types struggled to find support. This has been a notable pattern over recent times especially when the market is soft.

The other message was in regard to non-mulesed wool; it was noted that buyers competed aggressively, especially on Thursday. We are hearing of a more regular demand and AWEX is reporting more frequently identifiable premiums for wool designated non-mulesed.

Crossbred wool didn’t see the shining results of Merino fleece this week. Demand was lacking and as a result, 26-28 micron wools lost 50 to 90 cents.

Merino Cardings also improved with the Cardings Indicator in Sydney – 13, Melbourne – 16 and -31 in Fremantle compared to the previous sale.

The week ahead

Next week all centres are listed to sell.

A look ahead shows that roster offerings are declining, with 37,290 listed for next week and 33,761 for the following week. This should support the market in the short term.

There is an old market adage that the best cure for high prices is high prices. They often encourage additional supply to come to the market and lead to a price easing which was certainly the case for most lamb and sheep categories this week.

East coast saleyards reported declines for all categories of lamb and sheep, except Restocker Lamb, which managed an 8.7% gain to close back above 600¢/kg cwt (Table 1). The remaining lamb categories posted falls between a 3-4% magnitude, with the benchmark Eastern States Trade Lamb Indicator (ESTLI) sitting right in the middle of the pack at a 3.5% decline to 761¢/kg cwt. Mutton registered the weakest drop, down 2.8% to close at 421¢/kg cwt.

Combined East coast lamb and sheep yarding levels remaining elevated and well above the normal seasonal range. This is a bit of a clue to the weaker prices, with the additional sale yard numbers acting as a drag on prices (Figure 1). At nearly 260,000 head yarded this week, throughput levels of lamb and sheep are sitting 44% above the seasonal average for this time in the year. Above average sheep and lamb yardings were reported across Victoria, NSW and South Australia, suggesting it’s not just the dry conditions in NSW encouraging the stock to be brought forward but also the decent prices on offer.

The surge in sheep slaughter noted in last week’s commentary extended further this week with an additional 10% added to see the highest weekly sheep slaughter since 2015 at over 152,000 head of mutton processed for the week ending 3^rd August (Figure 2). In contrast, lamb slaughter numbers continue to slide, reaching the lowest weekly total it has seen this season at just over 307,000 head and resting 5% below the five-year seasonal average for this time in the year.

What does it mean/next week?:

Apart from Victoria, there continues to be little rain forecast for the upcoming period. Despite the easing prices this week for most categories of lamb, across the East coast prices remain well above the levels they recorded this time last season (Table 1). Indeed, Heavy Lambs are sitting 36% above 2017 levels at over 800¢/kg cwt. This suggests supply will continue to be encouraged forward and with that in mind its likely to see a continuation of softening prices into the short term.