Virus remains key influence for livestock prices

Coronavirus is still a key factor in livestock prices, as the world battles both the virus and economic headwinds. Jenny Kelly reports.

Taking off: A $100 million government subsidy has helped guarantee flights of chilled lamb to the Middle East.

IN THIS mixed-up world it is still possible to connect the dots to work out what is behind some livestock price movements.

In the lamb market, lightweight processing lambs have gained momentum in the past week while the big export lambs, which have had a lot more time and feed invested into them, are starting to lag, and are certainly not at the price point most farmers had hoped for this late autumn.

As a comparison, the price quote for small Muslim kill or “bag lambs” out of Bendigo this week was about 950c/kg carcass weight in a robust result, compared with 760c/kg to 800c/kg for heavy exports in a softer trend.

The key reason — and yes we are all tired of this word — is coronavirus.

Thanks to the Federal Government stepping in to support airfreight with an injection of more than $100 million, there are guaranteed flights to destinations like the Middle East in coming weeks.

It has opened up decent tonnages for chilled bag lambs — sent in as whole carcasses usually weighing 14-17kg carcass weight — to destinations like Dubai, Saudi Arabia and Qatar.

If reports are to be believed, Victorian processors such as Midfield Meats have the lions’ share of the allocated freight, which is why buying activity for decent lines of small lambs has picked up at saleyards.

Agents quoted little lambs in the sweet spot of about 17kg carcass weight at more than $10/kg at Swan Hill last week.

Adding to the buying pressure on lightweight lambs is the early autumn break across NSW, which has caused a restocking boom among farmers.

On the demand side, just 1814 tonnes of Australian lamb made it into the United Arab Emirates last month — a drop of 17 per cent on year ago levels, according to export data. And sales early this month were also at lower levels because of bans on international travel (usually chilled lamb travels as cargo on passenger flights).

So there is a gap to fill.

And as of Monday this week, media were reporting just 59 cases of coronavirus in the UAE — a vastly different situation to the havoc the virus is reaping in the US, which is one of Australia’s key destination for big heavy lambs.

Overall, there is little joy in any overseas destination that is linked to heavy processing lambs that usually end up in the high-value food service or restaurant sector — the US, UK, Japan and Singapore to name the leaders.

Or in the words of one export buyer this week: “There is no food service left operating in any major country in the world at the moment, and that is the outlet for racks and loins and the sweet cuts which generate the money from a lamb carcass — you just can’t recover it selling (those cuts) in a supermarket situation.”

Aside from the disruption to normal sale patterns for lamb, there are also reports of exporters having difficulty moving shipments through US ports or having carcasses further broken down and packaged in US boning room facilities.

The Port of Philadelphia in Pennsylvania handles nearly 60 per cent of all the sheepmeat and beef sent from Australia into the US, according to figures from Meat and Livestock Australia.

It is a big chunk of all our imports, and there is growing fears the port could face the same problems witnessed in China earlier this year when the virus badly affected the unloading of shipping containers.

As a region, Pennsylvania has one of the highest infection rates of coronavirus in the US, according to coverage coming out of that country.

While fears of abattoir disruptions due to coronavirus haven’t eventuated in Australia, there are numerous reports of some major US processing plants being forced to close or cut production because of positive coronavirus tests among staff.

Just this week a JBS operated beef plant at Greely in Colorado was forced to shut. All this leads back to why heavy export lambs are not finding much price traction heading into winter — food service demand globally has been crunched, freight and further processing or packaging is an issue and there is a great deal of uncertainty as to how sales of higher-priced lamb (against chicken, pork and beef) will fare internationally going forward due to weaker economies and wage losses.

The feedback from export processors this week was generally negative, although none would put their name to predictions for heavy lambs.

The milder comments were along the lines of “I think we’ve seen the best of prices for a while”.

On the home front, the number of lambs booked on forward contracts and direct to processing in coming weeks, stretching out to a couple of months, could keep a cap on saleyard price movements.

A number of agents have told The Weekly Times that producers have been favouring a guaranteed return for lambs in these uncertain times.

Among these was Elders Riverina livestock manager Ron Rutledge who said the safety of a set price deal had resulted in good numbers of lambs being forward sold this autumn and winter period.

“I think a lot of contracts have been filled, partly because of the climate we are in with a lot of ‘ifs’ out there due to this coronavirus situation,” Mr Rutledge said. “People have really looked for the security of having a set price.”

This time last year the national heavy lamb indicator (24kg-plus) was at 708c/kg carcass weight, lower than the current estimate of about 800c/kg.

But the lamb market then went on a wild ride, gaining more than 200c/kg by the end of May and peaking at 994c/kg carcass weight in mid-July.

You would have to be an optimist to believe heavy lambs could record such a winter price premium this year as the world battles coronavirus and major economic headwinds.