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Merinos and mutton hit new records

We still haven’t hit winter, but lamb and sheep prices are doing a good job of maintaining a winter peak.  This week Merino lambs hit a new record, trade lambs continued to rise, and mutton continued to surge upwards.

If ever there was a year to have held onto sheep and lambs, this was it.  We are only in May and Merino lambs have moved further into uncharted territory, the National Merino Lamb Indicator this week hitting 633¢/kg cwt (figure 1).

In Victoria Merino lambs were just 4¢ weaker than the Trade Lamb prices.  On a national level Merino lambs are at a 5% discount to the ESTLI (figure 2).  Merino lambs have been closer to the ESTLI twice in the last eight years, but it is usually fleeting.  Strong wool prices and a restocking push are no doubt seeing good demand for Merino lambs.

Mutton prices hit a new record this week as well.  The National Mutton Indicator reached 523¢, while in Victoria the mutton was at 550¢/kg cwt. Interestingly sheep yardings and slaughter has been stronger than the same time last year, so processors seem to be getting enough.

It looks like restocker demand is pushing mutton prices along, they are 40% stronger than this time last year.  The ESTLI is ‘just’ 16% higher than last year.

Over in the West lamb prices are nearing their eastern states counterparts, the WATLI at 657¢/kg cwt.  WA Mutton is languishing however, sitting at 417¢, which is 133¢ behind the national indicator.

The week ahead

The Bureau of Meteorology (BOM) have been forecasting drier than normal conditions for much of the country for a few months now.  This has been followed by good rainfall on the east coast at least, so many will take figure 3 with a grain of salt.

If we do see drier than normal conditions, it should mean lighter lambs, sold earlier, and weaker prices.  Rainfall could continue to defy the forecasts, but there is some significant downside price risk come late winter.