Category: Sheep

Lamb markets continued to tank this week. It shouldn’t really come as a surprise, with the previous 850¢+ levels clearly unsustainable. Interestingly, over the hooks prices rallied, with saleyards and direct prices converging.

All lamb prices were smashed this week. The east coast indicators finished Thursday between 97¢ (restocker) and 43¢ (light lamb) lower, all back in the 700s, except for heavy lambs which managed to stay at 818¢/kg cwt.

Prices are, however, still way above the same time last year. The Eastern States Trade Lamb Indicator (ESTLI) has fallen 92¢ from the high but remains nearly 200¢ above the same time last year.  Prices may be down, but they are still very good.

Over the hooks prices continued to move higher this week, following saleyards in order to get supply. With the ESTLI falling back to a comparable level to over the hooks rates (Figure 2), processors should be starting to get some more lambs direct. Perhaps this is why saleyard values have lost some ground.

Mutton prices were stoic in the face of falling lamb values. As noted last week, mutton prices are still relatively cheap and processors are no doubt trying to fill up kills on animals which might still be making some sort of margin. The National Mutton Indicator rallied 10¢ for the week to a two month high.

It looks like lambs are starting to move in the West as well. Trade lamb prices fell 28¢ to 633¢/kg cwt, while mutton lost 34¢ to 428¢/kg cwt. With prices still historically very strong, there shouldn’t be any complaints about the lower values.

What does it mean/next week?:

The question now is how far lambs prices can fall. Supply can ramp up, but only to a point as we know the ability to finish lambs this year is limited. Values above 750¢ are likely to continue to encourage anything that is at trade weights to hit the market, but if they fall below 700¢, sellers might take a punt on putting more weight on and looking for upside.

The Eastern States Trade Lamb Indicator (ESTLI) eased this week despite declining supply at the saleyard and low slaughter figures, suggesting softening demand. In contrast, mutton prices have managed to gain ground despite stubbornly high throughput numbers for the last month and very much above average slaughter figures. Perhaps there’s something other than saleyard volumes and slaughter levels impacting the price at present.

The weekly trend in throughput for the 2018 season for lamb and sheep is highlighted in Figure 1, along with the respective five-year average pattern for yarding levels. Lamb throughput has dropped 30% from the previous week and sits 23% below the seasonal average. The low supply of lamb at present is replicated in the weekly lamb slaughter figures which are running 25% under the five-year average.

In contrast, sheep yarding has been holding firm above the average trend for eleven weeks now and currently sits 57% higher than the seasonal average. High saleyard numbers of sheep are flowing through to elevated mutton slaughter levels with the weekly sheep slaughter running 50% above the five-year average level.

Despite the alternative supply scenario for mutton and lamb, this week prices have responded against conventional wisdom with the ESTLI dropping 3% to close at 855¢/kg cwt while East coast mutton has managed to firm 2% to hit 481¢/kg cwt.

Perhaps the missing element is demand and more specifically offshore buying. Recent trade figures have shown declining volumes for lamb exports while mutton export levels have managed a stellar performance over August.

What does it mean/next week?:

A clue to the waning offshore demand for lamb and the firmness of offshore mutton markets could be the relative historic levels of each commodity in foreign currency terms.  The ESTLI is US$ terms has been approaching levels unseen offshore since the 2010/11 peak at around 670US¢/kg cwt (Figure 2).

In contrast, the offshore mutton price in US$ terms is only marginally higher than this time last season and remains over 100US¢/kg below levels recorded during the 2010/11 highs (Figure 3).  Perhaps there is some further upside for mutton in the short term, particularly if supply begins to tighten. At the very least, mutton prices may be able to hold their ground in the face of a weakening ESTLI as the Spring flush gets underway.

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.