Category: Sheep

Slaughter and supply in elevator highs

Posted on by Caitlin Dearden

Elevated sheep slaughter continued to drag on mutton prices this week across the East coast and, while sheep supply in NSW is running at levels similar to what we saw this time last season, it is interesting to note that Victoria has seen a significant lift in sheep slaughter rates since the start of 2019 compared to the first few months of 2018.

NSW sheep slaughter levels have been averaging close to 57,100 head per week since the start of the season, only marginally ahead of the 55,800 head recorded for the same timeframe during 2018. Although, compared to the five-year seasonal average NSW sheep slaughter has now had two consecutive seasons where weekly slaughter has been running nearly 30% above the five-year trend, representative of the dry conditions facing NSW producers – Figure 1.

In contrast, Victorian sheep slaughter levels began the 2018 season below the five-year average pattern, with slaughter levels not really taking off until the middle of the season. So far in 2019 it has been a robust start to sheep slaughter levels in Victoria with a weekly average of nearly 65,000 head processed. This is 31% higher than the volumes we saw slaughtered during the same timeframe last season and 26% over the five-year average trend – Figure 2.

The additional supply of mutton across the East coast weighing on prices with sheep prices 5% lower than where they were this time last year, after staging nearly a 7% decline on the week to close at 385¢.

Sheep prices not alone in the price drop this week with all NLRS reported categories experiencing a decline – Figure 3. Although, Restocker Lambs the are the only other category to be lower than this time last season – albeit marginally at 1¢ softer to close at 613¢.

The Eastern States Trade Lamb Indicator (ESTLI) performing best this week out of the NLRS reported lamb categories with only a 2.5% decline to finish at 639¢/kg cwt. Declines ranging between 3%-4% noted for other lamb types.

What does it mean/next week?:

With supply remaining elevated and not much rainfall forecast for sheep country in the coming week there isn’t a lot to inspire a price lift. Although it is worth noting that higher slaughter now will likely mean less available supply when we hit the depths of Winter so there will be plenty of time for price to play catchup then.

Buyers cautious and sellers confident

Posted on by Caitlin Dearden

From a seller’s perspective, this wool market is almost surreal, it is a great time to be selling. However, this week buyers were wary and the market eased. Nothing dramatic but slightly cheaper none the less.

The wool producer’s response was to increase the pass-in rate; with prices at highest or near record levels, this seems curious, however, the risk associated in the seller’s eyes is minimal. Supply into the future will remain constrained.

The Eastern Market Indicator (EMI) eased over the week, falling 8 cents by the end of the week to 2,008 cents. The Au$ was significantly weaker. As a result, the EMI in US$ terms was down 26 cents to end the week at 1,415 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) had corrected late last week and pushed even lower this week with a further 20 cents fall to at 2,157 cents.

45,130 bales were offered for sale this week, with the trade clearing 41,166. This is 3,680 less than last week, a sign of confidence from seller’s in the market moving ahead. 8.8% or 3,964 bales passed in.

In the auction weeks since the winter recess, 984,703 bales have been cleared to the trade, 190,094 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 6,789 bales per week fewer.

The dollar value for the week was an impressive $87.99 million, for a combined value of $2.33 billion so far this season. A simple calculation of $ value divided by bales sold gives us $2,196 per bale across all types.

Crossbred types were mostly up 10 to 30 cents, though 30 MPG were cheaper of last weeks record levels.

The week ahead

According to the AWEX roster, the next week an offering of 41,722 bales is predicted. The roster currently tips a drop with 37,630 and 37,560 bales rostered for the next two weeks.

It is difficult not to be confident going forward, any easing of the market will be met by reduced selling by growers. With supply tight this woud pose a problem for exporters and their mill customers.

The big changes in wool supply continue

Posted on by Caitlin Dearden

Low supply remains a key issue in the greasy wool market, with the uncertainty of projected production for 2019 easily leading to various views on what is likely to happen. For the supply chain this uncertainty is magnified by language and cultural differences. This article takes a look at the latest AWTA core test volumes for February.

To illustrate the uncertainty of greasy wool production, search the internet for good merino wool supply data for Russia, China and South America. You will be hard put to find up to date historical production data, let alone reliable production projections. In Australia our historical production data is excellent (https://www.awtawooltesting.com.au/index.php/en/statistics/awta-analytics ) and while production projections are better than in other parts of the world there is plenty of room for improvement.

In Figure 1 the year on year change in volume for the past month and past three months by micron category for AWTA core test volumes (farm bales) is shown. The changes are in line with those seen since the early spring; more fine merino wool and less broad merino wool, with similar changes in the crossbred categories.

Figure 2 repeats the analysis of Figure 1 but for longer time frames. The season to date volumes for a range of micron categories is compared to the previous season and for the average of the past five seasons (all data used is July to February). The fall in broad merino volumes shown in Figure 2 is looking like it is becoming a structural change with 21 micron volumes down by 40% on the 2017-18 season and also compared to the five season average.

To summarise these changes in supply Figure 3 shows the average merino fiber diameter sold at auction for the past decade. The fiber diameter stepped down in 2012-2013 then stabilised through to 2017 roughly in the range of 19.1-19.3 micron before stepping down again in the past year. The average merino fiber diameter in February was a low 18.5 micron.

Now back to the wool supply chain. Put yourself in charge of mills which use various micron categories of wool, especially the 20-22 micron categories. What do you plan for in terms of purchases in the coming 6-12 months? Do you punt that supply will partially recover or do you assume broad merino volumes will remain at low levels? This is why uncertainty about production in 2019 is unsettling.

Key points:

  • While February AWTA volumes were “only” down by 6% the trends evident since the spring continued.
  • 20-23 micron volumes continue to be well below earlier period volumes.
  • The average merino fibre diameter reached a low of 18.5 micron in February.
  • The supply chain faces some difficult decisions in the coming year with regards to broader merino supplies.

What does this mean?

AWTA data shows a continuation of trends seen since the early spring. In many seasons volumes vary by relatively small amounts, but 2018-2019 is a season when there has been a big shift in production which will require the supply chain to think hard about supply in the coming year and seasons. The drop in the average merino fibre diameter is a good illustration of the marked change in production.

Weekly Wool Forwards for week ending 8th March 2019

Posted on by Caitlin Dearden

The forwards market dropped off to measly pickings this week with only four trades agreed, and one of those was for coarse wool. This is in stark contrast to what we saw through February and even in comparison to last March forwards figures over the last three years.

In the fine wool category, one trade was dealt for 19 Micron in June for 2280¢. In the medium wool category, two trades were dealt for 21 Micron in June, both at 2250¢. In coarse wools, one trade was dealt for 28 Micron in May at 1,050¢.

The Aussie Dollar has come steeply down over the last two days, which would usually see more interest in the forward market from overseas buyers. Physical auction prices are still at record levels, despite cooling slightly this week. The question is whether this week is just an anomaly, or will we see less trades dealt through the rest of March, even with a correction of the AUD?

Big offering but market solid

Posted on by Caitlin Dearden

After 8 weeks of consecutive rises in the wool market, producers responded with a large offering which resulted in a clearance to the trade of 44,800 bales.

The opening sales in Melbourne followed the weak finish in Fremantle last week. However, by the close on Thursday, it was a positive sentiment, with all centres posting gains on Thursday.

The Eastern Market Indicator (EMI) eased over the week, falling 11 cents by the end of the week to 2,016 cents. The Au$ was again slightly weaker also. The EMI in US$ terms was lower, down 10 cents to end the week at 1,441 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) had corrected late last week, so this week it lifted a further 16 cents to end the week at 2177 cents. This is now the highest level since September2018.

48,948 bales were offered for sale this week, with the trade clearing 44,846. This is 5,400 bales more than last week, a sign of confidence from buyers and a signal that growers are pleased with these levels. Only 8.4% or 4,102 bales passed in.

In the auction weeks since the winter recess, 943,537 bales have been cleared to the trade, 190,651 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 7,061 bales per week fewer.

The dollar value for the week was an impressive $99.27 million, for a combined value of $2.24 billion so far this season. A simple calculation of $ value divided by bales sold gives us $2,215 per bale across all types.

Crossbred types were mixed, 28 & 30 MPG were cheaper of last weeks record levels, while 26 & 32 MPG’s were up 10 – 20 cents.

The week ahead

According to the AWEX roster, the next week is another solid offering of 46,000 bales predicted, a big increase on last weeks estimate. The roster then drops sharply with 38 & 37,000 bales rostered for the next two weeks.

The tightening supply on the horizon should see the market activity remain robust, at least for the foreseeable future.

Pricing resisting supply pressure, but maybe more to come

Posted on by Caitlin Dearden

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.

January records smashed for lamb exports

Posted on by Caitlin Dearden

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.

Signs of tightening supply

Posted on by Caitlin Dearden

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.

Wool market Springboks past 2,000 cent mark

Posted on by Caitlin Dearden

If we were to think of what “black swan” events might impact the wool market in 2019, Foot and Mouth Disease (FMD) outbreak in South Africa (SA) would not have been high on the list.

This, however, has been the case as this week China decided to bypass SA wool auctions, leading to Cape Wools SA deciding to suspend wool sales this week.

This decision was on the back of an outbreak of FMD identified in January in the Vhembe district in Limpopo.

The Eastern Market Indicator (EMI) surged on opening in Melbourne on Monday, gaining 59 cents by the end of the week to 2,027 cents. The last time it settled above 2,000 cents was in October 2018. The Au$ was again slightly stronger up 0.57%. This resulted in the EMI in US$ terms was also dearer, up 50 cents to end the week at 1,451 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) was also pumped by the events across the Indian Ocean, rising 31 cents to end the week at 2161 cents. This is also the highest level since October 2018.

42,029 bales were offered for sale this week, with the trade clearing 39,447. Again, growers were impressed with the market and passed in only 6.1% or 2,582 bales.

The dollar value for the week was $83.56 million, for a combined value of $2.14 billion so far this season.

In the auction weeks since the winter recess, 975,539 bales have been cleared to the trade.

All types benefited from the strong market, however later in the week there was evidence that buyers may have been over exuberant and markets retreated from the peaks of Wednesday.

The week ahead

According to the AWEX roster, the next week 49,738 bales are predicted, with a designated Australian superfine sale in Sydney. This is a significant jump up from volumes rostered last week as strong prices are enticing sellers to come forward. 38,813 and 36,460 bales are rostered for the next two weeks.

While it is disappointing for our wool producer friends in South Africa, the continued uncertainty around China’s intentions should see our market at least sustained at these levels in coming weeks.

Weekly Wool Forwards for week ending 22 February 2019

Posted on by Caitlin Dearden

Last week we tipped more activity on the forwards market in the coming weeks. What we didn’t expect, was the driving force behind the spike to come from South Africa. With China suspending all greasy imports from SA, overseas buyers have pounced on the Australian market to secure supplies through this uncertainty.

Sixteen trades dealt in total over the week, despite a lift in the AUD to 0.716 in US terms.

In the fine wool category, 19 micron wool traded at 2,310¢ for May 2019. Contracts for October 2019 dealt in a wide range between 2,190¢ and 2,260¢, while November saw deals struck at 2,200¢ and 2,225¢.

Sellers were happy to look well ahead to lock in some prices. February 2020 contracts traded at 2,200¢ for the 19 micron. Deals were also struck for October and December 2020, and even January 2021, at an agreed price of 2,075¢.

In the medium fibre category, we saw 21 micron at 2,290¢ for February 2019. June 2019 landed two deals at 2,240¢ and 2,260¢, while October and November traded at 2,150¢.