Lamb price rise ‘simply’ supply and demand

The sudden drop-off of heavy lambs into key saleyards has been the driver behind the lamb price rise, with the saleyard indicator breaking 800c/kg for the first time this year.

It has taken longer than industry anticipated, but the lack of carry-over lambs into the winter has finally hit the market and triggered rapid price gains.

The saleyard indicator for heavy lambs has gained 50c/kg in the past seven days to break the 800c/kg threshold – the first time it has been at this price point since a brief rally in May last year.

It has taken the lead pens of extra heavy export lambs above $300 at multiple sales in the past week.

Two key dynamics drive the market, namely supply and demand.

Supply has been the trigger this winter after producers were stripped of feed and price confidence in the spring when lamb prices were dragged below 500c/kg carcass weight amid the forecast of a dry weather event.

While the shortage of carry-over lambs was expected to hit earlier this season, the tough autumn kept numbers rolling in and has potentially exaggerated the supply pool of old-lambs that exists for July to the onset of decent numbers of new-season sucker lambs (usually late August into September).

The figures graphed on this page give an insight into the sudden drop-off in heavy lambs that have hit key saleyards in the past two weeks.

It is the trendline for heavy lamb supply captured by the National Livestock Reporting Service at the biggest weekly prime markets – Wagga Wagga in the NSW Riverina, and Ballarat and Bendigo in Victoria.

In the NLRS data set heavy lambs are considered 26kg carcass weight-plus.

Wagga Wagga has gone from regularly offering around 9000 to 10,000 heavy lambs per sale in April, May and June to show a 25 per cent decline on this supply in the first weeks of July, to hit a low of 7500. It is the lowest throughput for the past three months, discarding the April figure which was distorted by Easter and Anzac Day disruptions.

There has been bigger percentage cuts to heavy lamb supply at the southern saleyards of Ballarat and Bendigo. In the past week the number of heavy lamb sales at Ballarat recorded by the NLRS dropped to a ballpark 2500 head to be half of where it was listed a month ago, and the lowest number this season.

At Bendigo heavy lamb supply dipped below 1000 lambs during the first week of July.

The tighter supply in the auction system is coming into play as most meatworks do not have as much coverage from forward contract and direct sales heading deeper into winter.

Supply wise the pressure on processors to find adequate numbers of good processing lambs will only ease once sucker lamb supply builds, and that is likely to be late this year due to the dry autumn which has affected the condition and weight gain of most early drop lambs.

The rising lamb price has also helped drag up mutton values, as price trend lines for the two commodities tend to track each other.

While the saleyard price difference between lamb and mutton has been very wide in the past year (getting out to 400c/kg and more at times amid high sheep kills and the market collapse in the spring), historically the difference in tighter stock supply times has been between 200c/kg to 300c/kg.

Good lines of trade mutton were quoted above 500c/kg at Bendigo this week, which brings it back into that line with good lambs listed as costing processors above 800c/kg.