Category: Lamb

The higher prices last week brought more lambs forward, and as such the rally was stifled.  With supply still running strong, it seems to be a countdown until a sharp supply shift.

Here’s an interesting stat.  Combined east coast sheep and lamb slaughter has only been higher than our most recent data for one week out of the last three years.  Figure 1 shows that was back in November.  With copious supply, prices are holding up extremely well.

Figure 2 shows the Eastern States Trade Lamb Indicator (ESTLI) and the National Mutton Indicator, and both were relatively steady this week.  With no yarding data for this week yet, we have to go off the individual yardings.  In Victoria at least, sheep and lamb yardings were both higher, as grower’s responded to the better values of the previous week.

Over the hooks prices gained ground in Victoria this week.  Average trade lamb prices gained 12¢ in Victoria, moving back to 670¢/kg cwt.  It will still take some time to get lambs in however, with many processors reportedly booked out until April.

There has been plenty of talk this week about ordinary scanning rates in NSW.  This fits nicely with high sheep slaughter, with dry ewes going to market rather than being fed more.

The question is how long it can continue.  We didn’t think it could be stronger, but the sheep liquidation this year has outdone 2018.  Does this mean the supply correction is going to be earlier and stronger?  Probably, but no guarantees.

What does it mean/next week?:

There is no rain forecast for the next fortnight.  The Bureau of Meteorology (BOM) forecast for the next three months is not very compelling either.  Whether you believe the BOM three month outlooks or not, it suggests the correction in supply, and price upside might be nearer to last year’s than first thought.

Department of Agriculture and Water Resources (DAWR) trade statistics for January show a 15.6% year on year increase in lamb exports and the gains in mutton export flows aren’t far behind, up 15% on January 2018. Despite posting similar volume gains, a breakdown of key destinations for the lamb and mutton export trade shows that the growth in demand is being driven from different regions.

Total lamb exports from Australia were reported at 21,541 tonnes swt, the highest January volume on record and coming in 21.4% higher than the five-year seasonal average for January – Figure 1. The January 2019 lamb export volumes were 15.6% above the 2018 level, boosted by record flows to the Middle East and the USA.

Australian lamb product to the Middle East totaled 6,487 tonnes swt, the highest January total on record, 25% up on January 2018 and 36% higher than the five-year average trend. Even stronger percentage gains were noted for the USA with the January 2019 lamb export volume of 5,593 tonnes swt also posting the highest January figure on record, increasing by 35% on January 2018 levels and 38% above the five-year average for January.

Mutton exports out of Australia for January 2019 show a similar lift in volumes, increasing 15% year on year to 15,485 tonnes swt – Figure 2. However, the significantly above average volumes for mutton during January were limited to Asian destinations, namely China, Singapore and Taiwan, to see the January flows sit 13.7% above the January five-year average.

Growth in mutton flows from Australia to China were up 18% year on year for January to see 4,805 tonnes swt consigned, the second highest volume for January and just a fraction short of the record 4,822 tonnes sent during January 2014 – Figure 3.

What does it mean/next week?

Last week we reported on strong beef export numbers for the start of 2019, fueled by growing Chinese demand, to see China overtake South Korea as the third top destination for Australian beef exports.

Perhaps the issues faced in China currently regarding African Swine Fever (ASF) and the reports of nearly one million pigs being culled due to the contagion are beginning to flow through to additional demand for alternative proteins, such as beef and mutton. It is early days yet, but it will be worthwhile to keep track of the ASF developments in China as the season progresses to determine what impact, if any, it is having on our export markets.

Key points:

• Lamb exports recorded the highest January monthly total on record coming in 21.4% above the January seasonal five-year average at 21,541 tonnes swt.
• Lamb consignments to the Middle East and USA underpinned the strong January results, with both destinations registering record January flows.
• January mutton exports were supported by Asian demand growth, coming in 13.7% higher than the five-year average for January at 15,485 tonnes swt.

A nice lift in prices across the board for all NLRS reported categories of lamb and sheep along the East coast this week, as saleyard throughput figures suggest supply is on the wane. The Eastern States Trade Lamb Indicator (ESTLI) gaining over 3% to close at 665¢/kg cwt.

Prices lifted between 1-6% on the week, with Restocker Lamb the worst performer of the bunch managing a meagre 5¢ lift to close at 646¢ (Figure 1). In contrast, East coast mutton was the standout jumping 6.4% to finish the week at 415¢/kg cwt.

East coast lamb yarding levels provide a clue to the current price behaviour. Throughput has eased 27% from the week prior to see the 2019 trend dip below the normal range for the first time this season with less than 135,000 reported through the saleyard last week. Indeed, since the start of the year average weekly lamb throughput levels have been running 14% below the five-year trend (Figure 2).

East coast sheep yardings posted a dive of a similar magnitude too, registering a 29% drop week on week. Despite the reduced sheep numbers, weekly levels remain just within the normal range at around 75,000 head as above average weekly NSW sheep throughput stems the broader east coast decline in sheep numbers (Figure 3).

Since the start of 2019, average weekly sheep throughput in NSW has been running 14.5% above the five-year average level. In contrast, Victorian sheep yarding levels have been trending 9% below the five-year average, while South Australian sheep throughput has been 20% softer than the seasonal average.

Next week:

There is nothing of note in terms of rainfall on the BOM weekly forecast for sheep and lamb rearing regions, but the dwindling supply is probably enough to keep prices sustained as we head toward Autumn.

Late last week the lamb and sheep market found some strength.  Prices will only fall for so long before grower baulk and put other strategies in place.  Either supply has run out, or producers are holding off.  Either way it looks like we might have seen the bottom.

It took until later in the week, but the Eastern States Trade Lamb Indicator (ESTLI) and the National Mutton Indicator both jumped higher yesterday.  Based on the individual saleyard reports we know that supply was back, and even with a lot of lambs going direct to works, buyers had to battle it out.

The ESTLI finished the week up 22¢ at 643¢/kg cwt (figure 1).  This is after hitting a low of 621¢ on Tuesday.  The major market mover was Wagga, with higher prices on big yarding, while in Victoria yardings were well back, and prices higher.

The National Mutton Indicator was also higher, but figure 2 shows it hasn’t broken its downward trend.  It will have to go back past 420¢ before we can say that.

If you’re wondering why mutton has gotten cheap, figure 3 gives a pretty good idea.  Last week east coast sheep slaughter was at level which has only been beaten three times in the last 3 years.  That was last August.

WA and SA had the most expensive trade lambs this week.  Both sitting at 667¢/kg cwt, they are well ahead of last year, but likely have upside potential.

What does it mean/next week?:

It will be interesting to see if the price rise last week is enough to see lambs come back to the market. We wouldn’t really think so, but on the other hand processors do have a lot of lambs booked up, so prices aren’t going to go crazy.  For now.

The dip in lamb and sheep supply after last weeks shortened selling program was evident in throughput levels reported to Friday 1^st of February. Lamb and sheep prices have continued to ease this week, suggesting that saleyard volumes have rebounded.

The Eastern States Trade Lamb Indicator (ESLTI) softened 4.6% this week to close at 633¢/kg cwt. East coast mutton was under pressure too, easing 7.6% to 368¢. Mutton prices across the Eastern seaboard have succumbed to elevated sheep slaughter volumes, with particularly high cull levels noted out of Victoria over the last month (Figure 1).

Victorian mutton slaughter has been running at weekly levels 24% higher than the five-year average since the start of 2019 and the increased volumes have continued to weigh on Victorian mutton prices with a 10¢ drop reported across Victorian saleyards according to the mid-week MLA market report. Victorian mutton is not the cheapest in the country though, at 378¢ it is still faring better than SA. SA mutton has dragged the chain, dropping 44¢ to 322¢ to make it the cheapest mutton in the nation.

East coast sheep yarding levels (as at Friday 1^st February) are reflecting the shorter selling week with a 29% drop noted from the prior week’s figures to see just shy of 59,000 head change hands. The 2019 pattern is closely mirroring the five-year seasonal average trend and if this is any indication of what to expect for sheep yarding figures when MLA report them next Wednesday, we could see sheep yardings rebound toward the 85,000 head level (Figure 2).

A similar yarding pattern is emerging for East coast lamb with the 2019 trend also mirroring the five-year average (Figure 3). Lamb throughput (as at 1^st February) declined 13% from the previous week to see it a whisker away from the seasonal average at around 138,000 head. Assuming lamb follows the seasonal average, we can expect to see a jump toward 190,000 reported for this week. Indeed, the price action suggests that supply has rebounded.

What does it mean/next week?:

Monsoonal conditions in northern Queensland have spun off a bit of moisture into the bottom South East quarter of the nation this week and a little more is forecast to fall into the coming week. While it isn’t enough to get lamb and sheep prices booming it’s likely to put a floor under further easing in the coming weeks.

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.

There are still plenty of lambs coming for slaughter in Victoria, but NSW supply is waning. As such, lamb prices have been on the wane early in the year, and mutton has also been dragged lower.  It seems the destocking of sheep isn’t over yet.

In recent years the first few weeks of January have been marked by a lamb slaughter peak as lamb is stockpiled for Australia Day.  This year we are headed the same way on an east coast level, but Victoria has jumped to an early peak (Figure 1).

It appears there are still plenty of finished lambs flowing to Victorian processors, and this means bids at saleyards haven’t had to lift to fill kills.  The Eastern States Trade Lamb Indicator (ESTLI) this week dipped to its lowest level since June.  At 651¢/kg cwt, the ESTLI is still better than this time last year, but a long way off the contracts offered for January back in the spring.

Sheep supply has also been strong early in the year.  This has made our prediction of mutton being the star performer of early 2019 look a bit ambitious.  East coast sheep slaughter started the year well below the end of 2018, but at a higher level than any seen in the first half of 2018.

Mutton prices have tanked in response, Figure 3 shows Mutton hitting 374¢/kg cwt, a three month low.  Figure 3 also shows mutton can be very volatile and is just as likely to bounce back if supply tightens.

What does it mean/next week?:

There is little rain on the forecast, and as such prices will be relying on weakening finished lamb supplies to see any price rallies.  The same goes for mutton, and it’s hard to see sheep continuing to flow at current lower price levels. We have seen lamb prices rally during dry times, but not this early in the year.