Lamb prices fall as producers struggle for processing space

A supply bottleneck has emerged in the lamb network, with short kill weeks and limited processing dropping prices significantly.

Lamb producers face an uncertain trading period as short kill weeks and limited processing capacity cause a bottleneck in supply.

Trade lamb prices last week dropped to their lowest level in 12 months, dropping 5-23c/kg carcass weight and sitting up to 96c/kg lower than this time last year.

All lamb indicators closed last week at less than 800c/kg except for restocker lambs.

Prices are expected to reflect the challenges for the processing industry for the next few weeks and could take the shine off winter peaks.

The combination of three shortened kill weeks due to Easter and Anzac Day is also working against a more ordered flow of lambs into the market.

Mecardo analyst Angus Brown said a lack of kill space earlier in the year (reflected in low kill numbers) had caused a glut of heavier lambs in the market place now.

“People had feed around, and prices weren’t great, so they held those lambs and now with shorter kill weeks, it is all coming to a head,” Mr Brown said.

“We feel like these numbers will wash through during April and May and while forward prices won’t be 900c/kg, we have seen contracts more than 800c/kg.”

Mr Brown said processors had offered contracts to shore up supply in case lambs became dearer.

“My opinion is that we will see winter price peaks, just not at the level we saw last year and later in the season, probably July or August,” he said.

“It is not long ago that 800c/kg was considered crazy money and now we think anything under 800c/kg is cheap, but it should still be possible to make money at this level.”

Riverina Livestock Agents director James Tierney from Wagga Wagga, NSW, said reports of processors operating as low as 60-70 per cent of capacity combined with bigger numbers of lambs held over summer were pushing down lamb values.

“I do feel like lamb values will increase later on, but it could be a while away yet,” Mr Tierney said.

“The market can get better, and it is easy to get bogged down in what is happening now, but the positive thing is we know the job (exports) is good at the other end.”

Mr Tierney said contracts offered for more than 800c/kg carcass weight for winter delivery were now filled, but others could emerge.

“I think we need to accept that 800c/kg is what 900c/kg was last season – I don’t think we will get to the levels we saw last year because there are just more lambs around.”