Tag: Analysis

Mixed signals for the lamb market this week as the spring flush appears underway in South Australia, but Victorian volumes still sheepish. Speaking of sheep, mutton prices are holding up resolutely in the face of elevated volumes at the saleyard and at processors.

East coast lamb prices reported by Meat and Livestock NLRS shows a 12¢ lift for the Restocker Lamb indicator to see it close at 820¢/kg cwt, underpinned by a big lift in SA Restocker prices which posted a 75¢ gain to 952¢. East coast Trade and Heavy lambs easing 15¢, with softer moves reported in Victoria and NSW for these two categories, to see them finish at 744¢ and 739¢ respectively.

Lamb prices in SA holding up reasonably well across categories this week with Heavy and Merino Lamb the only types to register a negative, and a small one at that, down 1¢ and 2¢. A good result for SA lamb producers considering the recent trend in yarding numbers show that they are amid their spring flush – Figure 1.

The wet week in Victoria seemingly taking some of the steam out of lamb yarding numbers there though, with weekly sale yard volumes easing back toward 50,000 head recently. Lower Victorian lamb numbers pushing the broader east coast lamb yarding levels to 175,000 head, 18% under the seasonal average for this time in the year.

East coast sheep yardings have softened during early November but they are coming off very high historic levels so they remain above the upper end of the normal seasonal range that could be expected for this time in the year and 30% over the five-year average trend– Figure 2.

East coast sheep slaughter remaining at elevated levels too at the top end of their normal seasonal range and running 16% over the five-year seasonal trend – Figure 3. Despite the high sheep supply east coast mutton prices are holding firm, posting a 9¢ lift to close yesterday at 590¢/kg cwt.

Next week

Limited rain is on the horizon in the coming week, even for Victoria which has been quite blessed in the lead up to summer. Late November/early December usually sees a significant lift in lamb volumes at the saleyard as the spring flush hits full throttle so there is likely some further pressure to be applied to lamb prices in the short term.

There was no real impact from the rain this week in sheep and lamb markets, with a cautious approach seemingly being taken. There was also the issue of the three month outlook and continued strong supplies.

Figure 1 shows sheep supplies in saleyards have been running well ahead of last year’s levels, and the five year average. Sheep yardings are rarely above 100,000 head but it hasn’t really dampened the price at all.

The National Mutton Indicator (NMI) managed a small lift this week, despite the strong supplies.  Figure 2 shows the NMI is a touch under 550¢, largely being propped up by Victoria where mutton is making 594¢/kg cwt.

Lamb markets were also steady on the east coast, as the spring flush of lambs stalled. NSW remains at a solid premium to other east coast markets, at 777¢ vs 735¢/kg cwt in Victoria and SA.  On the west coast, lambs are a long way behind the east coast.

Figure 3 puts the Western Trade Lamb Indicator (WATLI) at 632¢/kg cwt as lamb supplies continue to flow. The WATLI is, however, at a historically strong price for this time of year, and has plenty of upside.

Restocker lamb prices continued to fall this week, with the rain having little impact on the expected trend. As we draw closer to summer, declining feed reserves will continue to put pressure on restocker values. That is, of course, if rainfall doesn’t see feed reserves improve in a hurry.

Next Week.

The three month rainfall outlook isn’t great for most areas, and given the length of the drought, no one is ready to jump in just yet. Lamb supplies should continue to edge higher, but sheep supplies could easily contract, whether it rains or not. There might be a little further downside for lambs, but it looks like support for sheep is here to stay, and that should put a floor under lamb values.

As reported last week, sellers have been prepared to step out of the market when demand is weak, and this week the high pass-in rate told the story of the wool market performance.

There is no doubt that demand is not great right now, however, if the supply was not lightened by the high pass-in rates in the weeks where the market retreat, we could well be seeing bigger falls and greater fluctuation. It is hard to quantify the effect this grower response is having, but it must be supportive for the market.

This week the Eastern Market Indicator (EMI) lost 39 cents (after rising 77 cents over the last 2 weeks), to close at 1555 cents. The Au$ fell over 0.5 cents to US $0.686, causing the EMI in US$ to also fall 36 cents to 1,068 cents. The WMI also fell, albeit with a stronger finish in Fremantle (with a gain of 10 cents on Thursday), however for the week the loss was 25 cents for a WMI close of 1662 cents.

As the three-week run of improving markets came to an end, so too did the single-digit pass-in rates, – sellers again deciding to hold wool back on a falling market. This week the PI rate was 17.5% nationally. As a side note, almost 25% of Merino Fleece wool nationally was passed in on Thursday; in the West almost 26% of the offering was passed.

Sydney seemed to struggle to find a footing all week, with a specialty fine wool sale unable to inspire, although buyers selectively bid on wool with good measurements. Melbourne and Fremantle reported a positive tone towards the end of selling on Thursday, no doubt supported by firm grower reserves limiting sales.

There was a slightly smaller offering of 34,084 bales, just over 4,000 bales fewer compared to last week’s volumes. The high pass-in rate meant that there was also a big drop in in the number of bales sold, over 6,000 fewer compared to last week at 28,112 bales. The supply shortfall continues, with 105,884 fewer bales sold compared to the same period last year. This equates to an average weekly gap of 6,617 bales since July.

The dollar value for the week was $48.84 million, with a bale average value of $1,737, down $87 per bale on last week. The combined value so far this season is $726.90 million.

AWEX reported that the Crossbred and Cardings sections were not spared and gave up significant ground, however, a mild recovery in the Cardings in Fremantle was in line with the generally positive close to the week.

The week ahead

Next week an increased offering is listed, with 38,500 bales across the three centres.

We have been taking the lead for the upcoming week based on the closing sentiment in Fremantle, so we have a cautiously positive outlook for next week.

Sheep and lamb markets continued to slide this week, with supply ramping up. We don’t know what happened with yardings and slaughter this week yet, but last week sheep slaughter was heading higher.

Figure 1 shows sheep slaughter on the rise, well above average levels and heading towards last year’s extraordinarily strong

rates. Improving supply of sheep, and to a lesser extent lamb, has put a dampener on prices.

The Eastern States Trade Lamb Indicator (ESTLI) fell 12¢ to 760¢/kg cwt (Figure 2), a six month low.    Figure 2 shows NSW Mutton prices fell more heavily, losing 34¢ to 550¢/kg cwt, but they are doing a bit of a yo-yo at the moment, having gained a similar amount a fortnight ago.

In Victoria, Mutton prices held around 600¢, as while supply is increasing, demand for mutton is supporting prices.

Store sheep markets are running hot. With young ewes making well over $200 per head and ewes with lambs reportedly making over $400, it appears restockers are getting in before the anticipated price rise.

The price rise could come sooner rather than later.  At least markets should steady with the rain on the forecast over the coming week. There might not be many sheep left in NSW, but the rain will see any that might have been sold being held. It will be hard for sheep slaughter to keep rising.

WA sheep and lamb markets continue to lag well behind the east coast. This isn’t unusual for this time of year, with the season finishing. Demand from across the Nullabor might add some support if the rain keeps coming.

Next Week:

There were some strong forward contracts released for Northern NSW yesterday, with lamb at 820¢ and mutton over 600¢ in January. These prices are ahead of current rates, but if the forecast rain falls, and is followed up, we could get there a lot quicker.

Significant increases to yarding levels for both lamb and sheep across the eastern states in recent weeks has started to weigh on prices. Higher than average lamb yarding was noted in Victoria but the big lift in lamb throughput was reserved for NSW. Mutton yarding levels were elevated in all east coast states.

Weekly east coast lamb yardings levels hit a seasonal high last week at 231,591 head representing a 64% jump on the week prior. This places lamb yarding levels 16% above the five-year seasonal trend for this time in the year (Figure 1).

Lamb throughput in Victoria is trekking 9% ahead of the seasonal average but underpinning the jump in east coast lamb volumes at the saleyard has been NSW flows. Lamb yarding for NSW last week was up 48% on the week prior and is sitting 31% higher than the five-year average trend at 142,305 head.

Increased throughput wasn’t reserved for lambs alone with mutton numbers swelling too. Weekly east coast sheep volumes at the saleyard up 79% on the previous week to hit a seasonal high at 139,169 head. At this level east coast sheep yardings are sitting at massive 94% above the five-year seasonal average and you would have to go back to 2006 to find a higher weekly east coast sheep throughput level (Figure 2).

Higher than average sheep yardings were noted across all east coast mainland states with SA 42% above the five-year level, Victoria 51% higher and NSW, again underpinning the broader east coast figures, with sheep yarding levels 135% higher than the seasonal trend for this time in the year. Figure 3 shows the combined lamb and sheep throughput for NSW and it demonstrates how unusual this increase in saleyard volume is.

The National Trade Lamb Indicator (NTLI) feeling the brunt of the increased supply easing 4.2% this week to close at 770¢/kg cwt yesterday. Unsurprisingly, NSW Trade Lambs were lower too, slumping 4.8% to finish at 783¢/kg cwt. The National Mutton Indicator (NMI) eased 2.1% this week to 555¢/kg cwt. NSW mutton prices holding up well considering the elevated supply in recent times, dipping just 2.2% to close at 577¢/kg cwt.

Next week

The Victorian spring flush is underway but the significant numbers we see into November are yet to come. There is some rain forecast for Victoria this week which will allow producers to hold lambs for a bit longer if they are keen. Prices favour a downside bias until some of the Victorian supply is able to be accounted for.