Lamb price woes set to continue

Price gains for prime lambs didn’t last long after recent rain and now there’s concern for rates during a time they traditionally increase. See the analysis here.

Little sustained price reaction to this month’s widespread rain event seems to confirm the backlog of lambs still in the supply chain this winter.

Slaughter data also suggests the industry still has to account for a reasonable number of lambs, meaning there are unlikely to be any decent winter price premiums to kick start the annual run of new-season lambs, which are now only weeks away.

The price gains for trade and heavy lambs after the big rain, which were modest to start with, appear to be evaporating quickly.

According to data from Meat and Livestock Australia, the national price indicators for good slaughter lambs have lost about 30c/kg carcass weight in the past week.

It all seems to pivot around supply, and the change to lamb numbers in the auction system doesn’t have to be great to upset prices due to the sheer amount of stock being sold direct.

Supplies of lamb are up and there’s no sign they won’t keep rising.

The above graphic shows the national price trend line for trade-weight lambs. The interesting part is the ‘camel’s hump’ that has appeared in the past few weeks. When the price started to plummet, there were more than 40,000 trade-weighted lambs being counted daily at saleyards monitored by the National Livestock Reporting Service (NLRS).

In the days before the price hit the yearly low point of 548c/kg carcass weight, numbers got down to 36,000 in the calculation as producers held back. It then rained, and the market bounced back up to 608c/kg carcass weight, and this drew out up to 50,000 trade lambs in the daily calculation. The price has then started to plummet again.

The average price quoted for good 22-24kg carcass weight trade lambs at Dubbo in NSW on Monday was 548c/kg or $132. At Bendigo, it was $126 or around 535c/kg carcass weight.

It is a snapshot analysis which shows how fragile the market is around supply this season due to processors being heavily booked ahead with lambs, sometimes up to a month or more in advance. This takes buyers out of the auction system, and as an example, there were five orders missing from Bendigo on Monday – namely Fletchers of Dubbo, Coles, Woolworths (these three processors haven’t operated at this saleyard for some weeks now), plus Herds at Geelong and Gathercole.

A backlog of supply is set to erode premiums for prime lambs this winter.

Exaggerating the supply versus demand situation is the tight labour force which means meatworks aren’t running many extra or double kill shifts.

An analysis of lamb kill data suggests the market will likely remain under supply pressure this winter.

Based on weekly slaughter data published by Meat and Livestock Australia, there have been 8,723,716 lambs processed nationally this year (January to the second week of June). This compares to 8,219,781 lambs in the corresponding period in 2022.

Yes, it means an extra 500,000 lambs have been processed, but this increase has to be viewed against flock size. In June 2021, the national sheep flock was estimated at 70.8 million; in June 2022, it was forecast at 76 million. In the past two seasons, there has been substantial growth in ewe numbers, which inevitably leads to more lambs on the ground.

There is no truly accurate data available to show exactly what stock numbers are out there.

But if you were a betting person, the odds seem to favour a decent amount of lambs still to come in this winter.

Agents told The Weekly Times a major exporter last week put out some forward lamb prices for late winter, but the offer was reportedly removed within hours. Agents said it was unclear whether it was filled super quick or if it was a tool for the processor to assess how many lambs were still in the system; ie if the phone rings off the hook, there are lots, but if no one responds the lambs aren’t there.

These agents were keen to book in lambs but couldn’t get kill space.

There is now talk of how the backlog of old-season lambs could run into the start of the sucker season, which usually kicks off in August. The expectation is there should be some handy early suckers around due to plentiful irrigation water and the mild weather conditions this autumn.