Category: Lamb

The new key support level of 800¢ has held this week for the Eastern States Trade Lamb Indicator (ESTLI).  Prices steadied in all states, but it was the sucker lambs coming out of NSW which were priced the best.  

After dropping like a stone for five weeks the ESTLI found some support this week, right on the 800¢ mark.  The ESTLI had lost 150¢ over the previous five weeks, which equates to $30/head for a 20kg lamb.

There is plenty of speculation around as to the level at which processors can make money.  They might not be there yet, as lamb supply remains tight, but it is not far away.

In NSW lamb supply doesn’t seem so tight.  Figure 2 shows that at the end of last week (23/8) NSW lamb slaughter had returned to five year average levels, and sits 22.5% above the same time last year.

Prices are better in NSW, with trade lambs at 816¢ versus 748¢ in Victoria.  Much of this could be put down to a larger proportion of sucker lambs in NSW, and more old lambs in Victoria.  But it does seem demand for slaughter lambs is stronger in NSW.

National Mutton prices lost a little ground this week, down 11¢ to finish at 574¢/kg cwt.  Mutton is, however, the only ovine indicator which is stronger than last year’s levels, and a lot stronger, sitting 101¢ above the same week last year.

Low volumes in WA saleyards throw up some interesting moves.  This week restocker lambs in WA were down 128¢ to 481¢/kg cwt, while heavy lambs were up 122¢ to 687¢.  The heavy lamb price looks realistic, but restocker lambs look very cheap. There should be a bounce next week.

What does it mean/next week?:

The short and medium term rain forecasts are depressing.  South West WA is the only area which is expected to enjoy somewhere near normal conditions.  South East SA and South West Vic are forecast for a reasonable September, which should ensure some sort of spring (figure 3).  However October and November have a smaller chance of median rainfall.

For prices the basic take from this is store lambs will get cheaper in the east, in a relative sense, more expensive in the west, while slaughter lambs might be hard to produce after Christmas.

It is tanking time for lambs, but not so much for sheep. Supply has been improving for both lamb and sheep, but it’s only lamb prices which have been on the wane. WA is a different story, with lamb and sheep values both falling heavily.

The Eastern States Trade Lamb Indicator (ESTLI) fell again this week, but the rate slowed a little. The ESTLI was back at 806¢/kg cwt on Thursday, which while being down 120¢ for the month, and 27¢ year on year, is still a very good price. Figure 1 shows it was only for a short period the ESTLI was higher last year and before that 800¢ seemed fanciful.

Interestingly, restocker lambs are priced 130¢ higher than this time last year, at 830¢ it’s not that much stronger than the ESTLI.

Mutton prices rallied marginally this week (Figure 1), with sheep supply remaining tight and export demand very good. There might just be money in mutton for processors at 600¢, and hence competition remains strong.

Combined sheep and lamb slaughter has been rising with processors coming back online after seasonal maintenance. Figure 2 shows combined sheep and lamb slaughter hasn’t been this low at this time of year since 2011. There is room for another 170,000 head of sheep and lambs to be slaughtered per week. This shows that supply remains very tight.

In WA, lamb and mutton prices continued to ease (Figure 3).  Mutton in the west is now close to 200¢ below the east. On a 20kg cwt sheep this is $40, which is more than enough for WA sheep to start to work their way east.  Further WA mutton price fall should be limited.

Next week?:

The forecast shows more rain for the south of both the east and west, but none for the drought-stricken zones. Demand for store stock is unlikely to improve, but it isn’t likely to impact on finished stock too much.

Lamb prices are looking for a base and 800¢ might be it. If it falls through 800, it is headed for 750¢.  Still a good price for sucker lambs, but starting to fall well below the forward contracts which have recently been on offer.

The lamb market continued to decline this week, and mutton managed to maintain its strength.  Wool producers can take some solace from this, in a week when wool prices have been tanking, at least their stock are still worth very good money. 

This time last year lamb producers were cock-a-hoop, with lamb prices busting through 800¢ and heading for new highs.  With prices this week at the same level, there is much less excitement.  This is especially the case for those with Merino’s.

The fall in prices slowed this week, with the Eastern States Trade Lamb Indicator (ESTLI) losing 22¢ to hit a three month low of 834¢/kg cwt.  Figure 1 shows the ESTLI is at almost exactly the same level as last year, although the price trend is in the opposite direction.

Lamb slaughter did lift last week (figure 2), but remains close to last year’s lows.  It will be interesting to see if lambs can keep coming, the historical trend is for rising slaughter from here, but anecdotal evidence suggests it should stay around current levels.

Mutton prices eased marginally this week, they remain over 100¢ above last year’s levels on the east coast. Sheep supply is tight, although falling wool prices might see a few more come to market in the spring.  It’s still worth shearing them, with skin values not matching the wool value.

In the west lamb and mutton markets did mimic wool, falling heavily.  The WA Trade Lamb Indicator (WATLI) lost 15% and mutton lost 16% (figure 3) with improving supply seeing prices fall back to first quarter levels.

What does it mean/next week?:

We might have seen the end of lamb slaughter lower than last year, as the difference has been large since May.  From here things might track at similar levels, although the dearth of sheep should support both mutton and lamb markets.

The Bureau of Meteorology released their three month outlook yesterday, and the depressing picture remains (figure 4).  There is little promise of drought breaking rainfall in NSW, with way too much brown on the map.  The question is whether there are enough sheep out there for another supply flush to push prices lower.

Just over two weeks ago the Eastern States Trade Lamb Indicator (ESTLI) was peaking at 951¢/kg cwt and yesterday it closed at 851¢ – how quickly sale yard sentiment can change as we approach the spring flush.

We aren’t in the depths of the spring flush yet, although Meat and Livestock Australia (MLA) reported this week of some early signs of new season lambs starting to show up in NSW. Meanwhile east coast lamb slaughter made a new seasonal low last week with under 248,000 head processed – Figure 1.

The reduced processor activity showing up at sale yard prices this week across the country with all national lamb and sheep indicators reported by MLA posting declines between 9-31¢ on a cwt basis. The National Trade Lamb Indicator (NTLI) easing by the greatest magnitude with a 3.6% drop to 842¢/kg.

The National Mutton Indicator (NMI) not far behind, reporting a 3.3% fall to rest at 559¢. The NMI feeling the impact of softer mutton price in the West, with WA Mutton off 85¢ to close at 484¢. Mutton prices on the east coast managing to remain at reasonably good historic levels between 565¢-605¢

Restocker Lambs the least impacted, only 1.1% lower to finish at 801¢/kg cwt, boosted by strong gains to Victorian Restocker Lambs which were up 48¢ on the week.

Producers responding to easing lamb prices over the last fortnight by pulling back throughput with the east coast yarding levels easing 29% from the week prior to sit fractionally below the five-year seasonal average levels for this time in the year – Figure 2.

East coast producers seemingly happy with the current mutton prices nearer to the $6 region as mutton throughput continues to trek along the upper boundary of the normal seasonal range averaging over 63,000 head per week over the last month, which is 20% above the five-year trend -Figure 3.

Next week

The magnitude of the recent fall in the ESTLI seems a bit of an over-reaction given we are yet to see any significant numbers presenting at the sale yard. Some good rain again to the southern regions this week will also help stabilise the market so I would anticipate a consolidation of prices at current levels in the short term and the chance of a small rally before we head lower again.

Although, don’t expect to see the ESTLI back near 950¢ this season as I think we have seen peak a few weeks back.

Remember last year when lamb prices moved through 800¢ and we thought it couldn’t go much further?  We have had a case of Déjà vu this year, although prices were 100¢ higher, and this week have continued to rally.

Lamb prices didn’t just creep higher either, the Eastern States Trade Lamb Indicator (ESTLI) rallied 37¢ to hit a new record of 945¢/kg cwt on Thursday. The ESTLI still hasn’t managed to catch the East Coast Heavy Lamb Indicator, but it did make up some ground. The Heavy Lamb Indicator gained 15¢, and also hit a record of 973¢/kg cwt.

Over in the west, the lamb price rally has stalled and has come back to 800¢. Being a predominately export market this gives us some idea of what export lamb processors would like to be paying.

Figure 2 shows it is likely to be some time before prices are able to be pulled back if last year’s supply trend is anything to go by. All the anecdotal evidence suggests the new season lambs are nearly a month behind normal, and there are likely to be fewer than last year. The supply dearth might last until September again.

Last year the dry winter saw processors killing a lot of sheep, replacing lambs on the chains. This year sheep will be hard to find as well. While the mutton price rally has stalled, it is feasible they could still be around 600¢ in mid spring.

Next week:

Can the lamb rally continue further? Forward contracts released this week offer a pretty good target of 1000¢/kg cwt, but can old season lambs reach this level?  If lamb supply gets as tight as last year and more sheep come to the fore, we could feasibly see the ESTLI at the magic $10 mark.