TFI explains how it sees the market playing out this season

One of Australia’s largest processors has revealed its minimum prices for lamb – and why prices need to stay above a certain range.

Lamb’s price hike has stalled as almost 50,000 lambs flooded into the Wagga Wagga market in NSW on Thursday.

Last week’s lamb and sheep auctions took a bearish trend, with the Eastern States Trade Lamb Indicator dropping almost 80c/kg in the past seven days, after a sharp spike, to sit at 790c/kg.

But one of Australia’s biggest buyers of lamb, Thomas Foods International, say it continues to operate “pretty much at full capacity” and will only move to drop kills as a “last resort”.

And, TFI says prices do need to remain sustainable for producers, and not drop below unprofitable levels.

According to the National Livestock Reporting Service, returns at Wagga on Thursday slipped by $15-$30 to average 775c/kg cwt on 20-24kg lambs.

NLRS reporter Leann Dax said the yarding was of “very mixed quality”, with lighter weight lambs in plain condition, and not all export buyers operated.

The abrupt dip in the lamb market comes after analysts suggested a shortage of numbers, as winter progresses, could see prices sit at historically high levels until November.

Victorian Farmers Federation livestock president Scott Young said producers needed at least 750c/kg cwt to stay profitable, and more than 800c/kg during winter.

TFI assistant southern livestock manager Jack Thomas told The Weekly Times that TFI was processing 180,000-200,000 small stock each week (sheep, lambs and goats) across its plants at Lobethal in SA, its newly purchased plant at Stawell in Victoria, and Bourke and Tamworth in NSW.

He said last year’s lamb price crash was “purely supply driven”. “Many of us (buyers) had three to five weeks kill ahead of them and 40 calls coming in each day with people trying to get rid of lambs,” Mr Thomas said.

Mr Thomas is speaking on a panel at the major industry event, Lambex in Adelaide next month and said one thing he would like to see improved in the industry was a reduction in volatility – in both turn off of stock and pricing.

“One thing I would like to see improve … is to try to avoid the panic and the glut (of lambs at times),” he said.

“That is one area I’m eager to help … how can we flatten the supply (turn-off) and volatility that isn’t good for anyone.”

Mr Thomas said this could be helped by better transparency – from both processors, sharing what was happening on global markets, and from producers, on stock turn-off.

When asked whether 750-800c/kg was a realistic price for producers to consistently receive to remain profitable, he said “yes, I think so”.

“We understand farmers are entitled to have a margin, and I think that level is probably the bare minimum people are entitled to; perhaps not at every stage, say at different periods in the spring, but people who trade or value-add that is about the rate that prices would have to be, at least,” he said.

TFI was now operating “pretty much at full capacity” with double shifts running at Lobethal and Tamworth, while Stawell was also at full capacity.

“We tend to avoid dropping kills even when it’s non-commercial to ensure we can still deliver to all of our customers overseas,” he said.

“There have been times when stock is simply not there and you have no other option.

“But that is last resort for us.”

He said it was clear there would be a delay on southern suckers this year, by four to six weeks, and supply would be tight from late August into October, which would put pressure on processors nationwide.