Category: Sheep

Strong throughput numbers for both lamb and mutton across the nation this week saw falls recorded in all national sale yard indicators, ranging between 3$ to 9 %.  The headline Eastern States Trade Lamb Indicator (ESTLI) dropping 9.4% to close at 601/kg, while mutton was equally weak, off 8.8% to 385¢.

The East coast sale yard indicators mostly mirroring the national falls, with many categories posting declines between 2% to 12%. In Victoria, Merino Lambs the weakest, falling 9% to 558¢, while in NSW Restockers took the heat with a 12% drop to 598¢.

Victorian and NSW lamb yardings shown to be running above average for this time of the year and this saw East coast throughput lift 33% on the week to sit 28% higher than the seasonal average for this time in the year – Figure 1.

Higher NSW mutton yarding the key behind the elevated East coast figures too this week – figure 2. NSW sheep thoughput currently 34.7% over the seasonal average level for this week in the year and the added numbers of mutton has pushed the East coast levels over 100,000 head this week, an 18.7% gain on the seasonal average.

Western Australian indicators for Merino Lamb and Mutton were particularly soft, both off 19% to 509¢ and 370¢, respectively. High throughput the likely culprit there too with WA mutton yarding levels showing a solid surge this week with 27,000 head recorded – an increase over the seasonal average of 66.3% – Figure 3.

What does it mean/next week?:

A wetter week is anticipated, particularly in the West, and this should stem some of the price declines experienced by producers this week. The BOM have forecast a higher chance for a wetter than average February and there hasn’t been much for the East coast for the first few weeks of the month – perhaps that means the second half of the month we will be some decent falls… fingers crossed.

This was a week of “toing & froing”; in early sales buyers tested the market to see if some of the gains from last week could be taken back. However, by the end of the week, buyers were forced to re-engage to secure volume.

A small catalogue of Merino fleece wool (AWEX reported the smallest Merino fleece offering since March 2016), and growers preparedness to pass-in around 8% of the offering eventually forced the hand of buyers.

Of the 42,500 bales originally offered, only 39,201 sold. The Pass-in rate was 7.8% or 3,318 bales.

The A$ was quoted up for the week to sit above US$0.79 at the close of selling. This contributed to the Eastern Market Indicator (EMI) falling by $0.06 for the week to close at 1812¢. After last week’s massive 102cents lift, The Western Market Indicator (WMI) gave back 42 cents to finish at 1879 cents.

The underlying strength in the market was evidenced by the EMI rising US$0.14 for the week due to currency movements.

Again, we have seen evidence that by passing-in lots, sellers are able to exert influence in the market to support wool prices when the market softens. Buyers have little option but to bid the market up to fill orders as there are scarce supplies of wool floating around the system.

In general, Cardings and Crossbred types had a good week, posting gains in all centres except for W.A., although in the West any types finer than 17 microns experienced “extreme” demand with up to 100 cent increases.

Growers need to take care with “off-type” wool; lines with low staple strength, high mid-breaks or excessive VM levels are the most effected in the current market. When the market rallies and buyers are scrambling to fill orders, faults are over-looked and prices for lesser quality wools are excellent.

However, when the market eases, these types are the most effected. Conversely, wool exhibiting good measurement holds value in an easing market due to the shortage of these types to fill existing orders.

The week ahead

Sales are scheduled for all three centres next week, with Melbourne selling on Tuesday, Wednesday & Thursday while Sydney & Fremantle will only offer on Wed & Thur.

A total of 41,815 bales is rostered, only 1,000 bales less than this week’s offering but more than the clearance of 39,000.

This AWEX report probably summed up the sentiment of the wool market this week – “The recent wool market decline halted in stunning fashion”. Every one of the AWEX reported indices posted an improvement, some of the increases had to be seen to be believed.

The A$ also contributed and was quoted down 2.25 cents to US$0.7825 at the close of selling, helping the Eastern Market Indicator (EMI) to rise by $0.80 for the week to close at 1818¢. The Western Market Indicator (WMI) rose a massive 102cents to 1921¢ – figure 1.

To put this in context, the previous peaks were reached in the first sales of this year, then the EMI hit 1818 for the first time, while the WMI was quoted at 1888. To underline this recovery, the EMI in US$ terms is just shy of its 1434 peak in January at 1423. This has been an unprecedented reversal of the price declines of the last couple of weeks and reinforces the volatility of the market.

There are some interesting factors with the various indices; if we take Melbourne quotes as an example the 18 MPG on the opening sale week in January was quoted at 2363, it fell to 2225 over the following 2 weeks, and this week it sits at 2363; all this movement occurring over 4 selling weeks.

The 21 MPG over the same period started at 1800, fell to 1765 and now sits at 1891.

Cardings turned around their downward trend also, posting strong gains in all centres however of note was Melbourne and Fremantle, where gains of 100 & 120 cents respectively were recorded. Crossbred also joined in with 40 – 70 cent gains common.

Growers passed in only 2.1% of the offering in a positive response to the market.

This is a time for sellers to act in the wool market, fresh shorn stocks need to be baled and trucked to store for testing as soon as possible, and wool in store should be sold, either at auction or on Wool Trade.

Growers then should discuss forward sales with their broker representative. It’s not a question of whether sales should occur or not, these prices are unprecedented. The discussion needs to be around how much to lock in, and what is the best contract to use; these are questions that will have unique answers for each wool producing business.

The week ahead

Tasmania will eagerly look toward their traditional February special sale next week; while growers and brokers may have been nervous over the past couple of weeks, as it turns out the timing could not have been better.

Sales are scheduled for all three centres with Melbourne selling on Tuesday, Wednesday & Thursday while Sydney & Fremantle will only offer on Wed & Thur. A total of 43,000 bales on offer, almost 5,000 bales more than the clearance of 38,700 of this week.

This week the wool market appeared to draw breathe after the sharp falls of the previous two weeks. It was the fine end that fared the best, and of note was the strong competition for sound wool with low mid-breaks.

The higher A$ saw only a 1 cent fall in US $ terms, while the Eastern Market Indicator (EMI) ended the week down 6¢ to close at 1738¢. The Western Market Indicator (WMI) also eased marginally to register a 2¢ decline to 1819¢ – figure 1.

While the early sales for the week had buyers again showing caution causing the market to open weaker, by the end of the week a more positive tone had emerged. This was especially noted in the fine wool types (17MPG +21 in Sydney & +14 cents in Melbourne), as well as the mid micron categories. The 21 MPG in Melbourne improved 33 cents for the week while in Fremantle AWEX quoted the 21 MPG up 10 cents.

Since the market peak in the first sale of this year, the EMI is down 4.4% although in US$ terms it is only 2.2% of the peak. The 17 MPG is in fact higher, up 1.4% %, while 19 MPG is 3.5% weaker.

Cardings again were out of favour losing 30 – 40 cents, now having accumulated a drop over the last 3 weeks of 280 cents, a massive 21% down from the first January sale.

Growers passed in 7.6% of the offering. 42,000 bales were rostered, however only 39,500 were offered with 36,584 bales sold. The past 2 weeks sales of 36,500 bales have been the lowest auction clearances since last September.

A review of export destinations for the year to date reinforces the reliance the wool market has on China. 74% of all wool exported has been to China, with India taking 6% and Italy and the Czech Republic taking 5% each.

The week ahead

The weaker market has seen the numbers cleared to the trade fall to the lowest weekly total since September last year, well below the season average of 42,300 per week.

Sales are scheduled for Wednesday and Thursday next week in all three centres with a total of 40,000 bales on offer. Sydney has a dedicated Superfine sale.

After a significant spike to throughput for sheep and lamb at the start of January yardings figures have returned back within the normal seasonal range, combined with cool temperatures and a bit rain, prices have managed to hold firm for most categories of sheep and lamb this week.

The ESTLI barely changed, rising a slight 4¢ on the week to close at 637¢/kg cwt, similarly National mutton gained 4¢ to close at 407¢/kg. Table 1 highlights the Eastern States closing prices yesterday for a range of lamb and sheep categories with all but Merino lamb posting an increase.

East coast Restocker lambs staged a late rally jumping 30¢ yesterday to close the week up 9.7%, the best performer in the group. East coast Merino lamb the laggard, but only off 5¢ to register a 0.8% decline. A bit of a tussle between Victorian and NSW Merino prices this week, with Victorian Merino back above 600¢ after a 9.5% gain while NSW lost 4.3% to close at 582¢/kg cwt. In the West Trade Lambs the strongest category this week up 2.8% to 627¢, but still 10¢ shy of the ESTLI.

Figure 1 demonstrating that East coast lamb throughput has returned to more normal ranges, albeit it 27% above the seasonal average for this time in the year with just over 173,000 head yarded. A similar pattern displayed this week by East coast sheep with yarding levels sitting 20% above the seasonal average, but also within the 70% range, with around 70,000 head changing hands at the sale yard.

East coast lamb slaughter showing no signs of capacity issued despite the TFI disaster at Murray Bridge. SA lamb slaughter trekking well below average for this time of the season and sitting 38% under the seasonal average, understandably. However, some of the supply being taken up by Victorian and NSW meat works with the total East coast lamb slaughter running just 16% under the seasonal average – figure 2.

What does it mean/next week?:

A mixed bag for forecast rainfall into next week with the Western sheep rearing regions getting some good falls but most of the South-east missing out. However, BOM modelling for February shows a good chance of above average rain over the whole month for the South East and a very high change for continued rain in the West which is likely to provide further pricing support into the coming few weeks.

The wool market took a bit of a hit this week with most categories losing ground, with the exception of the very fine end. Cardings were hit particularly hard with the combined average fall for all three centres coming off nearly 200¢.

The higher A$ saw the falls in US $ terms lessened, but the benchmark Eastern Market Indicator (EMI) ended the week off 57¢ to close at 1744¢. The Western Market Indicator (WMI) mirrored the Eastern falls to register a 39¢ decline to 1821¢ – figure 1.

The Southern Carding indicator the worst performer of the three centres off a whopping 230¢ to see it move back under 1300¢. Northern and Western Cardings off 179¢ (1334¢) and 184¢ (1319¢), respectively.

17 micron and finer managed slight gains between 5-15¢ but most of the medium to coarse categories posted losses of a 20-70¢ magnitude. Reports from the auction floor stated that buyers were happy to pay for better prepared, quality lines but anything that was poorly prepared or suspect in quality was reasonably discounted, with buyers showing a willingness to step aside.

Growers reluctant to chase the falling market lower saw the pass in rate lift to 14.3% with 36,430 bales sold from a total offer of 45,525 – figure 2.

The week ahead

Chinese mills likely to begin the wind down in activity as we head toward the New Year festivities there and may mean buyer interest continues to wane in the coming week. A rampaging A$ above 81US¢, thanks to Trumps comments over the weekend unlikely to provide a lifeline for wool prices this week.

Sales are scheduled for Wednesday and Thursday in all three centres with a total of 42,244 bales on offer.

Producers responded to the robust lamb and sheep prices on offer early in the New Year with some huge throughput figures this week noted across sale yards, particularly in Victoria and NSW. The effect of the added supply weighing on prices across the board.

The benchmark Eastern States Trade Lamb Indicator (ESTLI) softening 7.6% over the week to see it close yesterday at 632¢/kg cwt. Despite the large weekly decline the ESTLI is still sitting 2.7% above where it was this time last season, so its not all bad news for producers.

Most eastern states categories of lamb and mutton followed the ESTLI lower with falls ranging between 5-15%. National Mutton posting a similar magnitude decline to the ESTLI with a 7.8% drop to 424¢. WA Trade Lamb one of the few categories to buck the trend with a 4% lift to 672¢.

Figures 1 and 2 highlight the key reason for the broad correction this week, with both lamb and sheep throughput opening the season in a very strong fashion.

East coast lamb yarding was just shy of 335,000 head, boosted by strong Victorian and NSW throughput, to see it sitting at levels 86% higher than the five-year average for this time in January.  There was a similar story for mutton, with East coast yarding figures knocking on the door of 120,000 head, which reflects a 37% higher yarding level than the five-year average.

What does it mean/next week?:

Its hard to see yardings sustained at these levels into next week so further price pressure is less likely. Much of the rainfall next week is reserved for the far north, well away from sheep and lamb districts, with only 10-15 mm on the cards for parts of NSW, Victoria and WA.

The most recent release of Bureau of Meteorology rainfall forecast for February points to a much wetter WA, SA and Western Victoria/NSW – figure 3. The likelihood of this rainfall being just around the corner could provide some price support to lamb and sheep prices into the end of January.

For the first time in over a month we have the full suite of Meat and Livestock Australia (MLA) data to analyse. Even with all the data, the conclusions look the same. Markets are easing slightly thanks to a lack of moisture and a rising Aussie dollar.

We haven’t seen a quote for the 90CL Frozen Cow export price since mid-December, but the January numbers came in this week. The story for export prices are similar to those for most cattle prices. The 90CL opened the year slightly easier, down 10¢ in our terms before a slight lift this week to 569¢/kg swt.

In US terms, 90CL prices have gained a little ground on weaker supplies out of Australia and New Zealand, thanks to lower slaughter. In our terms prices are weaker, with the Aussie dollar trading well over 79US and thinking about breaking the solid resistance at 80¢.

The eastern and western young cattle indicators are almost in lockstep with the 90CL, but as we outlined in the cattle analysis this week, it was only a year ago that young cattle prices were trading at significant premiums to the 90CL. Widespread rainfall might see somewhat of a repeat, but not at levels of 100¢ which we saw last January.

We went looking for some seasonality in the EYCI to guide us to where the market might be headed. But as figure 2 shows there isn’t much to speak of in the last two years, nor on the five year average. We used to see cattle prices rising from January to March, but this is going to require some rainfall.

The week ahead

With no rain on the forecast, expect prices in general to continue to track sideways or slightly lower. There appears to be little in the way of external factors which are going to see prices rise in the absence of rain.  There is however, mounting evidence in international meat markets pointing towards another year of downward trends, even if we do see a moisture induced late summer rally.