Tag: Sheep

Hilltop lambs in the nosebleed section

Posted on by Caitlin Dearden

Robust lamb prices have been encouraging Victorian producers to come forward with lambs earlier than usual, but a dip in throughput this week has seen the Eastern States Trade Lamb Indicator (ESTLI) rocket to a breath away from the 800¢ barrier.  

Trade lamb prices across the East coast during July have been averaging 21% above this time last season and the strong performance has been inspiring producers to come forward with stock, particularly in Victoria.

East coast lamb yarding levels have been trending 23% above the five-year pattern for the first three weeks of July as highlighted on Figure 1. East coast lamb throughput boosted by Victorian numbers which had been trekking nearly double the normal levels during July attracted by prices above 700¢.

However, this week East coast lamb yardings eased 9%, moving back into a more normal seasonal range and the result of the relatively tighter numbers at the sale yard was to see a 5% price spike for the ESTLI to close yesterday at 798¢/kg cwt.

In a classic example of text book Economics, East coast mutton did the exact opposite to lamb, as the increased numbers of sheep recorded at the sale yard this week pressured the mutton indicator down 7% to close at 480¢/kg cwt.

East coast sheep yarding continuing to trend well above the seasonal average and above the normal range that could be expected for this time of the year – Figure 2. Mutton yardings jumping 15% on the week to sit 48% higher than the seasonal average.

The jump in local lamb prices flowing through to higher offshore prices this week with the ESTLI in US$ terms climbing to 590 US¢/kg – Figure 3. It’s interesting to note though that during the 2010/11 season lamb prices in US terms have been higher than where they are now, despite the record local prices. Indeed, when the A$ was above parity against the US$ in 2011 saw the ESTLI in US terms peak at 673 US¢. Mathematically speaking if the ESTLI was to reach toward the 670 US¢ level with an A$ back at the 75US¢ level that would translate to an ESTLI in local terms of around 890¢.

What does it mean/next week?:

It’s unlikely that we will see the ESTLI get to 890¢ this season with the Spring flush approaching. Even if there are less Spring lambs around this season, which is quite likely given the dry conditions we should still start to see the normal seasonal Spring price decline as we head out of Winter.

Some reasonable rain falls for WA and Victorian sheep rearing country is expected for next week but probably won’t be enough to support another strong rally in prices with them already being up in the stratosphere as it is. We are in nosebleed territory at the moment with these high-altitude lamb prices so it wouldn’t take much to see a little bit of a dip back toward the mid 700¢ region in the coming weeks.

Lamb has been more expensive in US terms.

Posted on by Caitlin Dearden

Earlier in the week, we looked at lamb prices in deflated terms, and they are indeed near record highs. We know that export markets are helping drive lamb prices, so it’s worth assessing whether lamb importers are also forking out record dollars for lamb.

When I started researching this article, I was sure that at some stage in the recent past there was an outlandish claim somewhere amongst the articles stating that lamb prices could get to $8. It took a while to find, but it was there (Read here).  The forecast was, admittedly, not made with a lot of conviction, but the thinking behind it was basically the price of lamb in US dollar terms.

Even with the Eastern States Trade Lamb Indicator (ESTLI) sitting just shy of 800¢, in US terms the ESTLI still isn’t at a record (Figure 1).  Back in 2011 when the Aussie dollar was at or around parity with the US dollar, the ESTLI in US terms was at 670¢/kg cwt. This week the ESTLI remains below this, at 588¢/kg. Lamb prices are not cheap in US terms, but they have been more expensive, albeit only for three months.

The peak of lamb prices in US terms is still 14% away in nominal terms, and obviously further in real terms. If the exchange rate stays steady, and the ESTLI reaches 670¢ in US terms, it puts the ESTLI in AUD at 905¢/kg cwt. Those who study Meat and Livestock Australia’s (MLA) saleyard reports will have seen plenty of lambs making more than 900¢, so it’s possible the indicator could get there, although unlikely.

For mutton, the upside seems to be stronger. Figure 2 shows the National Mutton Indicator (NMI) in US terms on a financial year on year basis. The current close to record mutton values are still 23% behind the record price in US terms set in autumn 2011.

While the dry weather has seen lamb supply tighten, it is still seeing sheep coming to market and keeping a lid on mutton values, to an extent.

What does it mean/next week?:

Looking at lamb prices in US terms helps go some way to explain how strong prices can be at the moment. While lambs prices are extraordinary in our terms, they are ‘only’ 20% above the levels seen for most of 2017 for importers. This might be sustainable for the short term and the good news is that it makes prices of 600¢ seem cheap.

There is still plenty of upside for mutton, especially when it rains. Strong lamb and wool prices are likely to see a real squeeze on the supply of older sheep over the coming years.

Key Points

  • Lamb prices in US terms are strong but have been higher back in 2011.
  • There is still a 10% upside for lamb to reach the 2011 records in US terms.
  • There is more upside for mutton prices than lamb, as it was 20% stronger in 2011 in US terms.

Heavy lambs closing on 800¢.

Posted on by Caitlin Dearden

This time last year lamb prices were great, sitting north of 600¢ at record highs. Who would believe prices a year later could be more than 100¢ higher? It seems unbelievable, and still, we have slaughter higher than this time last year.

Lamb prices have continued to rise and in the last fortnight, it has been Heavy Lambs which have taken the lead (Figure 1). Heavy lambs gained another 50¢ this week, to within striking distance of 800¢, sitting just below at 793¢/kg cwt. The Eastern States Trade Lamb Indicator (ESTLI) is ‘languishing’ at 758¢ after having gained 34¢ this week.

Supply is not as expected, with lamb slaughter to the week ending the 13th of June actually 3% higher than this time last year (Figure 2).  We won’t be able to confirm until more data is available, but slaughter weights must be on the wane. Prices started from light and Merino lambs at 680 and 675¢/kg cwt respectively, with trade and heavy lamb’s streaks ahead.

The strong prices have drawn out a lot of lambs to the market, with very few left to fill the heavy lamb space, which explains the extreme values. Lighter lambs are being sold as soon as they make slaughter weights and as such prices are lower but still at historical records.

Mutton values have stalled just above 500¢, but they too are well ahead of this time last year (Figure 3).  Mutton will continue to come to market while the rain stays away, which means prices might not move too much higher until there is some precipitation.

What does it mean/next week?:

How many producers would have the guts to forgo a trade lamb price of 750¢ in order to put another couple of kilos on and get 790¢? Not many it would seem, but it has paid off over the last month.

Southern WA, SA and Victoria are in for some follow up rain this week, which is unlikely to help lift sheep and lamb supply. Nothing is on the forecast for NSW, so the sheep will continue to flow while prices are good. The question now is, where are the sheep going to come from when it finally does rain?  The sheep/lamb spread could get very narrow.

Is it viable to feed lambs yet?

Posted on by Caitlin Dearden

We’ve fielded some queries this week as to when sucker lambs might hit the market. One option is to lot-feed lambs to get them finished quickly. This week we crunch the numbers on feeding lambs and see if there is money in it, or if there might be under a few different scenarios.

Last week, we analysed the NSW restocker lamb market relative to the Eastern States Trade Lamb Indicator (ESTLI) and the last week has seen it hit new lows. The NSW restocker spread to the ESTLI fell to negative 166¢/kg cwt (Figure 1). This not quite at the level of 2008, but the rise in the ESTLI to 744¢ and the fall or the NSW restocker to 578¢/kg cwt has the spread at a five year low.

The lack of grass and rising grain prices are driving the relatively weak restocker lamb prices. But are we now at a level which makes feeding lambs viable?  The answer is yes, but as always, a lot depends on the sell price.

Figure 2 shows the gross margins and the margins after feed or lotfeeding 32 kgs lambs to 46kg liveweight for the trade market. The cost of feed is based on a grain ration costing $450/t, with lambs eating 6kgs to gain 1kg liveweight.

At a buy price of around $82/head and a sell price of 550¢/kg cwt, or $116/head, feeding lambs will produce a small loss, and a bigger one if labour and other costs are included. If we factor in a fall in the trade lamb price to 650¢ the margin after feed is profitable, while a lamb price of 700¢ will see good margins after feed of $27 per head.

There is a reasonable chance that feeding lambs in NSW will turn a profit. However, the fact that prices basically need to stay in the territory which was uncharted prior to 2018, would make producers looking at feeding nervous about adding extra costs in an already tough year.

Additionally, getting lambs up to feedlot entry weights may not be that easy, and will require more feed and effort. This makes the simple option of selling more attractive.

What does it mean/next week?:

The fact that there is likely some profit in feeding lambs means we might start to see lambs appear on the market 6 weeks later than normal, but the numbers will be nothing like the traditional sucker supply.

In Victoria, restocker lamb prices are still relatively expensive, coming in $14/head higher than NSW for 32kg lambs. This limits the viability of grain feeding in the south, which might slow the supply of southern lambs.

Again we are left with the supply gap which is currently seeing the lamb market at record highs continuing on for at least another month to six weeks yet.

Key Points

  • The NSW restocker lamb price reached new five year lows relative to the ESTLI this week.
  • Cheap restocker lambs make feeding lambs viable if finished lamb values can maintain strength.
  • Lamb feeding is unlikely to close the supply gap of late suckers completely, with support for prices to stay for another month to six weeks.

Dry weather, merinos and store vs prime.

Posted on by Caitlin Dearden
  • The restocker lamb discount in NSW has reached new lows in recent weeks.
  • Store lambs are likely to remain relatively cheap if it doesn’t rain, finished lamb prices should remain strong.
  • A good rain will boost store lamb prices in the short term, and weaken finished lamb prices later.

Earlier this week we took a look at the usual supply of new season lambs out of NSW, and how this might change this year. Since then we’ve had a related query on how the expected increased supply of store lambs out of NSW might impact prices and whether Merinos normally soldas store lambs might be better off finished and on the hook. The answer, as always, is it depends on rainfall, but we’ll run some possible scenarios.

There is plenty of concern surrounding what will happen with NSW lambs which are not going to be finished at the usual time. NSW producers will have a couple of options. These lambs can be sold as stores in the spring. If it rains in the next month or six weeks, lambs are more likely to be grown out and sold later as finished lambs.

The question we had was from a grower who normally sells one-year-old merinos off shears as woolgrower wether lambs. The concern is that the price of store wether lambs might enter a market where buyers might be more attracted to cheap store crossbred lambs, rather than merino wethers.  The other option is to fatten the merino wethers to sell over the hooks.

In essence, we are taking a look at how the store market might be priced in the spring and how long merino slaughter prices might hold strong.

NSW store lamb prices haven’t taken a hit in recent weeks, they just haven’t recovered like the prime lamb market. The NSW Restocker Indicator has been trading between 550 and 600¢/kg cwt over the last month (Figure 1). It’s discount to the Eastern States Trade Lamb Indicator (ESTLI) has never been larger (Figure 2).

It’s not unusual for restocker lambs to become cheap at this time of year, but given the season in NSW, it’s hard to see restocker lambs bouncing back relative to the ESTLI. The worst case scenario is restocker lambs staying at around a 100¢ discount to finished lambs.

The ESTLI seems unlikely to fall below 650¢ in the medium term and given the expected finished lamb supply it should hold through into early spring, so we can peg restocker lamb values at 550¢, or $92 for a 40kg liveweight lamb.

Meanwhile, slaughter Merino lamb prices are holding strong. The National Merino Lamb Indicator is at 650¢/kg cwt (Figure 3), which is probably the best case price for the spring, as prices might fall as low at 580¢.  For an 18kg cwt slaughter merino lamb it gives us a $105 to $117 per head plus skin, which is a good premium to the expected store lamb price.

The Week Ahead:

This basic analysis gives a good indication that finishing lambs for slaughter in the spring is going to be a better option than trying to sell as stores in a dry season. If it rains it will open up options for lamb producers, as increasing feed supplies will see the store/finished lamb spread narrow.

We know that lambs need to be set on course for slaughter soon with preferential treatment or supplementary feeding, and if it rains this effort might be wasted. But it’s worth remembering finished lambs from NSW are still going to be a while coming, even if it does rain soon.

Lamb prices move further off the chart.

Posted on by Caitlin Dearden

Lamb and sheep markets have hit some solid resistance at the 730¢ and 520¢ mark respectively. There are plenty of reports of processors cutting shifts and slowing production rather than competing harder for lambs. The latest three month forecast doesn’t suggest the supply of finished stock is going increase soon.

You may have noticed that we have had to change the Y-axis on our Eastern States Trade Lamb Indicator (ESTLI) charts. In fact, when we rolled into the new financial year, the ESTLI was literally off the chart. The top of the ESTLI charts are now 750¢, but the rally has slowed and it might not get there in short term. However heavy lambs are not far off, hitting 743¢ this week.

We’ve seen a new record high for the ESTLI, this week gaining 11¢ to reach 724¢/kg cwt (Figure 1).  The WA Trade Lamb Indicator is ‘languishing’ at what used to be a very good price of 632¢/kg cwt.

The cheapest lambs in Australia are restocker lambs in WA, with the indicator at 514¢/kg cwt. In SA the restocker lamb Indicator was at 740¢, which makes the trip across the Nullabor viable. We’re not sure where the demand in SA is coming from, but suggest the indicator comes from a small number of lambs.

We heard an anecdote today about store sucker lambs coming from areas north of Adelaide with 1000 on a B-double. This is a lot of light lambs. We have been on about the increased supply of store lambs this week and this sounds like the beginnings.

What does it mean/next week?:

The weather forecast tells us the finished lamb shortage might last a while. There is a 65-80% chance that rainfall will be lower than the median across almost all of Victoria and NSW. There are some key lamb growing areas which are currently going ok, but most with new season lambs hitting the ground now are unlikely to be able to soak up extra supply from the north. It might be time to start thinking about how to finish lambs this year, even if they haven’t been born yet.

Prices consolidate as supply wanes

Posted on by Caitlin Dearden

After the big spike in lamb prices last week the market steadied. There was plenty of talk about the high prices making things hard for processors, but lamb and sheep slaughter still managed to remain at or above last year’s levels.

Figure 1 shows weekly lamb slaughter starting to follow the 2017 pattern very closely. The fall in slaughter last week was no doubt part of the reason prices rallied so strongly as it was the lowest full week slaughter for the year to date.

Like last year the tighter supply and higher prices are likely to trigger slowdowns in production, but the way lambs have been killed in April, May and June, there might not even be enough lambs for that.

Despite higher prices, sheep slaughter ramped up last week (Figure 2). This tells us that perhaps there is more money in sheep at the moment for processors. Combined sheep and lamb slaughter is still 5% higher than the same week last year.

The high prices last week drew some more lambs into yards, and this week it was heavy lambs which made the best money. The Eastern States Heavy Lamb Indicator gained 29¢ to hit a record of 735¢, while the ESTLI was up just 5¢ to 715¢/kg cwt (Figure 3).

In the West, prices eased 10% for both lambs and sheep, to 607 and 398¢/kg cwt respectively. At that price, sheep will start to work their way east, where prices in saleyards this week averaged 517¢/kg cwt.

What does it mean/next week?:

It looks like the 720-750¢ level is the limit for lamb processors. There were some pens of lambs reportedly making 800¢ this week though, and these were the highly sought after well-finished lambs. There’s not many of them about at the moment. Interestingly, there might be potential for a little more upside for mutton.

At least lamb and mutton are kicking goals

Posted on by Caitlin Dearden

It has been a long week for Mecardo’s resident ‘football’ nut in Ballarat, breaking up a busy week with a late night only to see the Socceroos going down two-nil. This correspondent is more interested in the local brand and is hoping the Demons can emulate the form of lamb and mutton this week, and get back on the rising trend.

We weren’t going out on too much of a limb by predicting the Eastern States Trade Lamb Indicator was going to hit a new record by the end of the week. At least it was right, the ESTLI closed Thursday at 710¢/kg cwt (Figure 1).  A couple of years ago we also predicted this but got it wrong. Demand has caught up, and supply seems to be seriously on the wane.

We have concentrated on the goings-on in the east this week, but lamb and mutton in WA have also rallied, albeit to a lesser extent.  The WA Trade Lamb Indicator (WATLI) has gained 50¢ since the end of April and while not matching the ESTLI this week, at 647¢/kg cwt it’s only a week behind (Figure 1).

Mutton is somewhat defying the live export issues in the west, with the WA Mutton Indicator gaining 62¢ in June to hit 431¢/kg cwt (Figure 2).  This is still 82¢ behind east coast values, which equates to around $16 on a 20kg cwt sheep.  The rally in east coast price might be propping up the west, as demand can draw sheep across the Nullabor.

What does it mean/next week?:

This week’s rally in sheep and lamb markets has occurred in the absence of any real rain.  We’ve had a couple of reports of the dearth of sucker lambs which normally come out of NSW at this time of year, and this is obviously helping to drive the market.

All indicators are pointing towards continued strength for sheep and lamb for the short term, and hopefully, the Demons can emulate the ovine strength, rather than the Socceroos form.

Falling throughput offers price support.

Posted on by Caitlin Dearden

Mutton and Restocker Lambs benefit most from a sharp decline in yarding levels this week across the East coast sale yards. Although, its Merino and Heavy Lambs that are currently top of the table when it comes to year on year price performance this Winter.

Figure 1 highlights the price moves this week at the East coast sale yards with most categories gaining 10-30¢. The Merino Lamb and the Eastern States Trade Lamb Indicator (ESTLI) were the only two categories to register a slight decline, finishing 0.5% lower at 651¢/kg cwt.

Don’t feel too bad for the Merino Lamb’s lacklustre performance this week as on a year on year basis prices are sitting 3.5% higher and a rampaging wool market are likely to keep Merinos in favour for much of this season.

The lack of Heavy Lambs in NSW and Victorian sale yards compared to this time last year is helping to keep prices supported. Heavy Lambs gained 12¢ this week to sit at 659¢/kg cwt, 3.7% higher than this time last season. Indeed, over the last month, yarding levels of Heavy Lambs at Victorian and NSW sale yards have been running around 10% below the seasonal average and 30% under what they were during 2017.

Lower throughput was a pattern repeated across the broader East coast lamb and mutton markets this week with a 28% decline in lamb numbers (Figure 2) and a 47% drop in sheep numbers (Figure 3), to see both weekly throughput measures back under their respective seasonal average levels for the first time in nearly two months.

Below average Trade Lamb yardings in the West over the past few weeks is helping to keep prices supported in WA too with the WATLI 1% higher on mid-week price quotes at 634¢/kg cwt. Although the big news in WA sheep circles this week was the worrying announcement by Livestock Shipping Services (the second largest live sheep exporter out of WA) that they are placing a temporary halt on their Australian operations and focusing on the South American live sheep trade.

What does it mean/next week?:

The rainfall forecast for the week ahead points to some moderate falls for Eastern NSW, South East Queensland and WA, but little elsewhere. It’s probably not enough to get prices surging but if the dwindling supply continues that should provide enough support to keep prices reasonably firm in the short term.

ESTLI closing the gap on last year

Posted on by Caitlin Dearden

The rain this week probably wasn’t as good as might have been expected. However, whether it’s the rain, or simply declining supply, good lamb prices are rallying and now sit just below the record levels of last year.

The Eastern States Trade Lamb Indicator (ESTLI) is finally making a run towards what could be called winter highs. The last three weeks have seen the ESTLI gain 54¢, or 9% to hit a five-month high of 654¢/kg cwt. Figure 1 shows the ESTLI sitting just below the same time last year, the first time in four months it has even been close.

As we would expect, it seems to be tight supply pushing the market higher. Lamb slaughter is trending down, as shown in Figure 2. This was helped last week by seasonal maintenance slowdowns in South Australia. The major slaughter states of NSW and Victoria have only seen slaughter rates decline marginally.

Mutton prices were steady this week, and unlike lamb values, are still 10% behind the levels of this time last year. This should really be no surprise given sheep slaughter is still running 37.5% above the same time last year. Sheep yardings are also still well ahead of last year’s levels.

In the West lamb and sheep prices were steady this week, both at levels behind the eastern states. WA values are still well behind last year’s levels, but there is still some upside with export demand running strong.

The week ahead

The bit of rain which has fallen isn’t going to be enough to finish autumn lambs, there will have to be some follow up. We might see the flow of female or merino wether lambs for a few weeks however, as growers take a wait and see approach. This leaves a nice supply gap over the coming weeks, and possibly rising prices if there aren’t too many more maintenance shutdowns.