Category: Sheep

Lamb finds a base to bounce off.

Posted on by Caitlin Dearden

The lamb market seems to have found a level it was happy with this week. With supply disruptions due to the Melbourne Cup, it’s hard to get a gauge on supply, but it appears we might have seen the spring low.

The latest yardings reported by Meat and Livestock Australia (MLA) are to the end of last week.  Figure 1 shows that the Melbourne Cup holiday, along with the lower prices, saw a 39.6% decline in yardings. The supply decline saw 119,000 fewer lambs hit the yards across NSW, Victoria and SA.

A quick look at this week’s lamb reports tells us supply has bounced back. Victoria yarded over 100,000 head, which is around normal for this time of year.

Slaughter numbers also tell an interesting story. Figure 2 shows the total sheep and lamb slaughter for the east coast has been close to last year’s levels. Despite stronger prices than last year, processors still seem to be able to make a margin.

Figure 3 shows the Eastern States Trade Lamb Indicator (ESTLI) has again bounced off 680¢ to this week post a 17¢ gain to hit 695¢/kg cwt. There was, however, a decline in prices at Wagga on Thursday, which dragged the ESTLI back from 700¢.

WA Trade lamb and mutton prices managed to maintain their strong levels this week, at 627¢ and 405¢/kg cwt respectively. It’s interesting, however, to see WA restocker lambs back at 554¢/kg cwt.  With cheaper grain in the west, you’d think there should be a narrower spread between restocker and finished lambs than in the east.

What does it mean/next week?:

Growers seem to have shown their cards, with prices under 700¢ now seemingly a hold for many.  It shouldn’t be surprising, with forward contracts close to 800¢ a recent memory.

With more rain forecast for the coming week across parts of NSW and key Victorian and South Australian areas, there might be more sheep and lambs held, and higher prices.

Wool market gets a toehold.

Posted on by Caitlin Dearden

Despite this week’s offering being the largest we have seen in a long time, the market managed to find a point to stabilise from the incessant falls. Sydney saw support for the broader microns, Melbourne found strength in the finer microns and mid fibres performed best in Fremantle, resulting in an overall steady week.

The Eastern Market Indicator (EMI) gained just 5 cents, ending the week at 1,781 cents. The Au$ lost some ground, closing at 0.727 US cents. That put the EMI in US$ terms to 1,295 cents, a gain of just 3 cents (Table 1).

In Fremantle, results were fairly mixed with the Western Market Indicator (WMI) rising just 4 cents to end the week at 1935 cents.

Compared to the original roster posted last week, only 35,326 of the 39,883 bales intended for sale this week actually came to the market. Growers appeared more confident in the markets level, passing in 10.9% of bales. This resulted in a clearance to the trade for the week of 31,487 bales, 6,032 fewer than last week (Figure 2). When we look back to the 2017 season, this week saw 36% less bales sold.

The dollar value for the week was $62.05 million, for a combined value of $1.28 billion so far this season.

In the auction weeks since the winter recess, 484,121 bales have been cleared to the trade, 126,565 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year continues to grow and now sits at 8,437 bales per week fewer.

It was the crossbred and oddments sectors that provided the market with the real boost. Crossbreds saw gains of 5 to 25 cents, while the carding indicators rose between 70 and 120 cents across the three centres.

The week ahead

The roster for next week shows 35,334 bales on offer across the three selling centres on Wednesday and Thursday. The following weeks are looking at 37,540 and 36,778 bales.

Considering the market managed to cease it’s decline even with one of the largest weekly offerings in recent times, there is optimism for the coming weeks.

Its officially a rout

Posted on by Caitlin Dearden

While AWEX comments on Thursday noted that the market had steadied there is no denying the market again suffered from a lack of buying demand. Reduced offering and falling prices across the board were the end result of what has been a perplexing 6-week period.

The Eastern Market Indicator (EMI) fell 76 cents to accumulate a 200 cent fall over the past 4 weeks, ending the week at 1,776 cents. The Au$ was again stronger up almost 2.1%; the EMI in US$ terms fell by 29 cents to end the week at 1,293 US cents (Table 1).

This puts the US$ EMI back exactly where it was one year ago, and with a dramatically reduced supply year-on-year the conclusion can only be that demand has fallen – at least for the immediate timeframe.

In Fremantle, the Western Market Indicator (WMI) lost ground, falling 74 cents on the back of the last two week’s 89 cents falls to end the week at 1931 cents.

Compared to the original roster posted last week, only 32,000 of the 35,000 bales intended for sale this week actually came to the market. Again, growers were unimpressed with the market and passed in 20.9% or 6,734 bales. This resulted in a clearance to the trade for the week of 25,455 bales, 4,359 fewer than last week.

The dollar value for the week was $48.9 million, for a combined value of $1.22 billion so far this season.

In the auction weeks since the winter recess, 452,634 bales have been cleared to the trade, 109,043 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year continues to grow and now sits at 7,788 bales per week fewer.

Of note is that over the past 7 weeks the EMI has fallen 237 cents or 11.7%, while the clearance to the trade has been 82,000 bales fewer than the same period last year.

The only bit of positive news from the market this week was AWEX reporting that on Thursday there was evidence that buyers were reluctant to pass up wool with good specifications resulting in some “resolute bidding” for these types.

Cardings again struggled to find support, with the Melbourne sale noting a further 6.4% fall.

According to the AWEX roster, the next three weeks less than 40,000 per week are predicted, with 39,883 bales next week.

After what looked like a steadier market last week, the opening on Wednesday was again a case of an accelerated decline as buyers waited for the bottom of the market to appear. Again, it would be a brave call to predict a rally next week, the best result would be a cessation of the decline.

The fall steadies but no light in the tunnel.

Posted on by Caitlin Dearden

Wool producers did their best to support the market this week; of the 40k bales rostered only 35,700 were eventually offered for sale with a further 5,900 passed under grower’s reserve. Despite this, the market again fell.

The Eastern Market Indicator (EMI) fell 20 cents on top of the last two week’s 149 cents fall, to end the week at 1,854 cents in AU$. The Au$ rose almost ¾ of a cent; the EMI in US$ terms fell by 5 cents to end the week at 1,322 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) lost ground, falling 28 cents on the back of the last two week’s 137 cents falls to end the week at 2005 cents.

Compared to the original roster posted last week, less than 75% of the 40,000 bales intended for sale this week were in fact cleared to the trade. Growers passed in 16.6% or 5,970 of the 35,784 bales that were finally offered for sale. This resulted in a clearance to the trade for the week of 29,814 bales, 3,500 more than last week.

The dollar value for the week was $62.06 million, for a combined value of $1.17 billion so far this season.

In the auction weeks since the winter recess, 427,179 bales have been cleared to the trade, 91,600 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year continues to grow and now sits at 7,050 bales per week fewer (Figure 2).

Of note is that over the past 3 weeks the EMI has fallen 169 cents or 8.3%, while the clearance to the trade has been 45,000 bales fewer than the same period last year.

This is a serious correction with the EMI giving back 12% since it peaked mid-August at 2116 cents.

19 MPG and broader types while also easing have been less affected, with 19 MPG and finer not only feeling the brunt of the general market correction, but also the increased volume of drought influenced fine wool has tested buyer’s capacity.

Cardings have plummeted in recent weeks, going from being the “star” performers to now almost unwanted. The Melbourne Carding indicator has fallen from the August peak of 1558 to this week close at 1116, a 28% retracement. Despite the more affordable price, 25.5% of offered Cardings did not reach growers reserve, with only 3,819 of the 5,120 bales offered sold.

The week ahead

According to the AWEX roster, the next three weeks less than 40,000 per week are predicted, with 35,600 bales next week. Growers have decided they are comfortable holding wool so its unlikely this number will get to the auction next week.

While this week the fall was reduced compared to the past two weeks, it is still too early to call the bottom of this recent correction.

Hold, Hold, Hold, Now!

Posted on by Caitlin Dearden

Those familiar with the movie ‘Braveheart’ will recall the scene where Mel Gibson and co are facing a cavalry charge from the English Army. Mel said ‘Hold, hold, hold, now!” and the Scottish rebel impaled the English horses on spears and subsequently won the battle. It’s a weak analogy, but with Victorian lamb producers facing encroaching dry conditions, they have held, and held, and held, until this week they raised their spears, but were themselves impaled. Metaphorically, not literally.

After Matt’s article last week, and earlier this week, looking at Victorian lamb yardings, or lack thereof, this week the lambs appeared (Figure 1). The lift in supply was felt across all yards, with Naracoorte in South East South Australia also seeing a big rise.

With plenty of lambs and sheep seemingly booked in over the hooks, prices tanked sharply. Normally we don’t see Victorian lamb yardings over 100,000 head for another month and so processors definitely didn’t have the space to kill them.

When supply overwhelms demand, prices fall. Although, there was some good news. The Eastern States Trade Lamb Indicator (ESTLI) fell 77¢ but only back to the levels seen three weeks ago. Processors and restockers were happy to buy lambs at the lower levels, even if they weren’t to be killed this week.

All lamb prices fell this week, but mutton ‘only’ lost 35¢ to sit at 431¢ on the east coast and 400¢ in the west. While in the west, lamb prices rallied, gaining 9¢ to 575¢/kg cwt. Still well behind the east, but on the way up.

Next week?:

The high prices of the last couple of weeks, along with dry weather, encouraged growers to offload lambs this week. The test will be whether supply continues to flow, or if it pulls back with lower prices. The Melbourne Cup usually sees lower yardings next Tuesday, so we might not get a real indication until the following week. The relatively strong prices in the face of heavy supply are encouraging, however, at least for well-finished lambs.

Tide turns for wool

Posted on by Caitlin Dearden

If last week was bad for wool prices, it turned out that it was only the start of the fall. This week, no segment was spared, and the full force of the correction was felt causing the market to fall dramatically.

The Eastern Market Indicator (EMI) fell 96 cents on top of last week’s 53 cents fall, to end the week at 1,874 cents in AU$. This is the lowest close since May. Despite the Au$ easing almost ¾ of a cent, the EMI in US$ terms was also hit hard, dropping 78 cents to end the week at 1,327 US cents (Table 1). The last time the US$ EMI closed below 1,350 was December 2017.

In Fremantle, the Western Market Indicator (WMI) lost ground, falling 61 cents on the back of last week’s 76 cents fall to end the week at 2033 cents.

Again, sellers adopted a strong position to the falling market, passing-in 23.6% or 8,150 of the 34,522 bales that came forward. This resulted in a clearance to the trade for the week of 26,372 bales, the lowest sale clearance for this season.

This again produced a reduced dollar value for the week of $57.23 million, with a combined value just ticking over the $billion mark to $1.10 billion so far this season.

In the auction weeks since the winter recess, 397,365 bales have been cleared to the trade, 76,273 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year continues to grow and now sits at 6,356 bales per week fewer (Figure 2).

The market peaked in August when the EMI topped out at 2116; since then the retracement has been of the order of 11%, while the 19 MPG has pulled back 9%. The last 2 weeks have been terrible for the wool market, almost 30,000 bales fewer sold compared to year-on-year figures, and the EMI has lost 7.8%.

For the second consecutive week, the superfine end has been hit hard, as the weight of drought-affected wool has caused the 16 & 17 MPG’s to pull back 15% from the August peak. Cardings fell out of bed this week losing a massive 11% in Melbourne and have come back from their August highs by 26%.

The week ahead

The offering next week is rostered at 40,000 bales; this week 7% of the rostered offering was withdrawn prior to sale so its most unlikely this number will get to the auction next week.

As buyers try to anticipate the bottom of the market, the uncertainty doesn’t give much confidence that the market will stabilise next week.

Where are the Victorian lambs?

Posted on by Caitlin Dearden

Reduced lamb throughput across all states this week saw prices rise across the board for sheep and lamb markets. The Eastern States Trade Lamb Indicator (ESTLI) demonstrated the apparent supply shortage with a 51¢ gain to see it close yesterday at 788¢/kg cwt.

The biggest drop in lamb yardings was reserved for South Australia, with a 24% decline noted in saleyard numbers this week, but all states posted a fall. The curious situation is the flat line of Victorian lamb throughput this week. This is the time in the season when numbers should normally be starting to swell (Figure 1). Victorian lamb yarding levels are running 13% below the seasonal five-year average for this time in the year and at 49,302 head, it’s a whopping 34% lower than the same time last season.

The reduced supply of lamb across the Eastern seaboard is having an impact on east coast throughput with the trend dipping back below the lower end of the normal range for the first time in over four months (Figure 2). East coast lamb yarding levels are trekking 15% below seasonal average levels and the lack of supply is evident in price activity this week.

The NLRS reported eastern states daily indicators posted price gains across all categories of lamb ranging between 25-85¢, with Heavy Lamb managing to break back above the 800¢ level to close at 825¢/kg cwt. Even east coast mutton managed to lift 14¢ on the week to close at 466¢, that’s despite sheep yarding levels on the east coast remaining elevated. Indeed, east coast mutton throughput is running 48% above the five-year average for this time in the season with NSW and Victorian saleyards the key contributors to the additional supply.

What does it mean/next week?:

The Bureau of Meteorology released their updated rainfall outlook yesterday and it paints a dire picture for November with most of the country expected to have a drier than normal end to spring (Figure 3).

If this isn’t enough to shake out any remaining lambs in the next few weeks then I’m not sure what will. Expect to see Victorian lamb yarding levels start to swell in the coming month and this is likely to put a cap on further price gains in the ESTLI for the short term.

Pass-in rates rise as market falls

Posted on by Caitlin Dearden

This week’s market posted a timely reminder that wool markets are not one dimensional, that is less supply does not always equate to increasing price. Supply fell and at the same time prices across the board retreated back to August levels.

The Eastern Market Indicator (EMI) fell a further 53 cents on top of last week’s 21 cents fall, to end the week at 1,991 cents in AU$. The EMI in US$ terms was cushioned to some degree by a slightly stronger Au$. The EMI dropped 25 cents to end the week at 1,405 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) lost ground, falling 76 cents or 3.5% to end the week at 2094 cents.

Sellers reacted strongly to the cheaper market, passing-in 19.4% or 7,013 of the 36,084 bales that came forward. This resulted in a clearance to the trade for the week of 29,071 bales, the third lowest sale clearance for this season. Of note was that on Thursday Fremantle passed-in 33% of all offered bales, while in Melbourne 31.6% of fleece didn’t make growers reserve on Thursday.

In Fremantle, AEX reported that grower reaction to the lower price of Wednesday resulted in 13% being withdrawn prior to sale and a further 40% of fleece lines failing to meet grower reserve.

This again produced a reduced dollar value for the week of $67.95 million, with a combined value just ticking over the $billion mark to $1.05 billion so far this season.

In the wool auction weeks since the winter recess, 370,993 bales have been cleared to the trade, 60,000 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 5,500 bales per week fewer (Figure 2).

Looking to the same sale of last season, this week’s clearance was a massive 14,000 bales fewer, and for the rest of 2017 up to Christmas, all selling weeks cleared in excess of 40,000 bales. The weekly average for this season is sitting at 33,700 and is only likely to shrink as the season progresses.

While falls were generally in the order of 1 – 2%, the outlier was the superfine end where the weight of drought-affected wool caused the 16 & 17 MPG’s to pull back 4%.

Cardings were particularly hard hit this week, Melbourne and Fremantle reported the Cardings indicator down 7.5 to 8.0%, while Sydney lost 6%.

The week ahead

The offering next week is rostered at 38,702 bales, which is most unlikely to get to the auction as growers digest this week’s market correction.

The final day didn’t provide any good news as a lead into next week, so we are likely to see a continued easing in the market as buyers try to find sustainable limits.

 

Rising supply but demand is matching.

Posted on by Caitlin Dearden

Sheep and lamb slaughter has been on the rise, but so have prices. Both lamb and mutton values rallied this week with significant rain falling just as processors seem to be increasing kills and looking for stock. The question is how much further prices can go?

Meat and Livestock Australia’s (MLA) weekly slaughter data is a week old but it tells an interesting story. Lamb slaughter was down 11% on the same week last year, but sheep slaughter was up 27%.  The total sheep and lamb slaughter, shown in Figure 1, was almost exactly the same as the same time last year.

It appears the kill space is opening up again as supply improves, and there might be some money in sheep and lambs for processors again, as they are pushing prices higher.

The Eastern States Trade Lamb Indicator (ESTLI) gained 36¢ this week, rallying back to 737¢/kg cwt.  Heavy lambs are still the highest price, at 742¢.

Figure 3 shows Mutton values regaining much of the fall seen in early October. While lamb prices have never been higher, apart from recent times, mutton values were indeed stronger in December last year. This suggests mutton might have a bit further to go.

Restocker lambs had the biggest move this week, gaining 90¢ to move to 739¢. There are perhaps some restockers anticipating the rain seen this week will result in some good pasture growth in what’s left of spring.

What does it mean/next week?:

With increasing confidence and renewed restocker demand, it’s hard to see sheep prices falling.  Lamb prices might have a blip or two left in them when Victoria’s supply appears in November.  Recent forward contracts suggest we might have already seen the low, however.

Forward contracts breaking with tradition

Posted on by Caitlin Dearden

With rising concerns surrounding the supply of finished lambs during the summer, export processors have released forward contracts. We say the forward contracts are breaking with tradition because they are pegged well above the prices of the same time last year, which they no doubt had to be if they wanted to get any traction.

The widely published forward contracts came from Thomas Foods International (TFI) who released the same prices for their Tamworth and Lobethal plants, for delivery from the start of December to the end of February.  TFI priced both crossbred and Merino lambs at levels well above the summer of 16-17, but below the recent peaks of September.

TFI’s December price for crossbreds was 750¢, rising to 780¢ in January and 800¢/kg cwt in February.  Merino lambs are 30¢ behind, and all are for 18-32kg cwt lambs.  These are extraordinary levels for lambs and will be a boon for those who can finish lambs on green feed.  For those who have to feed grain to lambs, the forward prices should be profitable, and hence this is part of the reason they are pitched there.

Over the last few years lamb forward contracts have been available for the summer, and are generally released at this time of year, and pitched close to the levels of the previous year.   The thinking is that prices are usually low in spring, and forwards around last year’s prices are generally acceptable to producers.

This year pricing forwards even at 700¢ would be unlikely to get much take up.  With spring prices sitting around 700¢, and prices over 850¢ a recent memory, few producers would be willing to accept a 650-700¢ forward price.

Figure 1 shows where the crossbred forward prices sit relative to last year, the five year average, and recent prices.  They are 12 and 28% above last year’s Eastern States Trade Lamb Indicator (ESTLI) depending on when you are selling.

Figure 2 shows the same chart but for Merino lambs.  The National Merino Lamb Indicator (NMLI) has never been above the 770¢ on offer in February.  Merino contract prices are between 19 and 35% above last year, and look like even better value.

What does it mean/next week?:

If producers are confident they’ll have lambs for delivery in the December to January period, why wouldn’t they take up forward contracts for at least some of their supply?  For it to be a costly mistake, lamb prices will have to be consistently over 800¢ throughout the summer.

While its likely lambs will get over 800¢ at some stage, having the price and delivery locked in means there will be no hanging out for better values.  For Merino lambs selling forward should be seriously considered, as higher prices are even rarer.

With forward contracts for many weeks now booked up at TFI, producers seem to have been happy to get on board and lock prices in.

Key Points

  • Lamb forward contract for summer have been released.
  • December price for crossbreds was 750¢
  • Merino lambs are 30¢ behind