Processors offer record lamb rates with supply tightening

Lamb processors are offering record forward contracts above $9/kg with dry conditions and tight supply cited as the reason. See our market analysis.

Lamb processors are facing a difficult transition period from old lambs to new season suckers this late winter, as evidenced by multiple companies issuing forward contract offers above $9/kg in the past week.

But could supply distortions carry on further into the year, creating another back-ended market where lamb prices are higher later in the season, like in 2024 when the price peak for heavy slaughter lambs was in December?

It’s a scenario discussed by agents following the somewhat unusual move by exporters to come out early and aggressively in May with “record” or near-record money for trade and export lambs not delivered until late winter. Of the price schedules seen by The Weekly Times, the best rate has been 980c/kg carcass weight (cwt) for crossbred lambs delivered into the Thomas Foods International network of plants at Stawell, Tamworth in NSW, and Lobethal in SA in mid to late August.

The “record” money claim is debatable, as some recall a $10/kg deal privately negotiated with limited lamb suppliers a few years ago when the market was running hot. However, agents acknowledge that current forward prices are probably the best broadly offered to all producers and sit at least 100c above current auction averages of 830c to 850c/kg for trade and heavy lambs.

Buyers line the rails at Bendigo. Picture: Zoe Phillips

Trigger points for this bold move include the unrelenting dry season, which has dragged supply forward and triggered a sell-off of lambs since Easter; rising grain and fodder prices amid shortages, affecting opportunity feeding; and new season lambs being born onto bare paddocks, making early sucker grade unlikely.

Highlighting how supply has been brought forward, lamb kill data for the week ending May 9 shows 521,289 head processed— the second busiest production week this year, just behind the pre-Easter peak of 527,000 head, according to Meat & Livestock Australia.

Traditionally, processors begin transitioning from old season lambs to new season suckers in August and September. This year, there are concerns old season lambs will run out early, and very few quality suckers with weight will be available—creating a double whammy shortage. The 900c/kg-plus rates are designed to encourage producers to feed stock to heavier weights through winter. Hit the maximum rate and 34kg cwt specification, and a crossbred lamb could return $333.

But is this just the beginning of drought-induced market distortions?

Agent Alex Collins of McKean McGregor believes there has been a shift in lamb production, stating, “Winter is now effectively the new spring.” While it sounds convoluted, he was referring to the large volume of spring-drop lambs born in August to October that are carried through to June–August. This shift means the traditional winter supply gap now hits later—namely September, October, or beyond.

Mr Collins noted that while the August forward price offers are strong, he doesn’t rule out a higher market peak later in the year: “I think it’s possible the lamb market could be dearer in September or October.”

To examine this trend, The Weekly Times analysed 25 years of data to determine the highest monthly price average for heavy lambs in each calendar year. The findings suggest a notable shift to later-season price peaks.

From 2001 to 2016, heavy lamb price peaks were consistently in the winter months of June, July, and August. The exception was 2011, when the market peaked at 600c in March—connected to the end of the Millennium Drought.

In recent years, however, peaks have arrived later: in November 2022, February 2023, and December 2024—months that had never topped the list in the prior two decades.

Some market watchers are already suggesting the lead-up to Christmas could again be a tight supply period for lamb, driven by the mass exit of breeding sheep from Victoria’s Western District and southeast South Australia, coupled with poor feed conditions ahead of winter lambing. These regions traditionally deliver large volumes of prime suckers from mid-November onward.

The shift to later lamb price peaks appears to have merit. Still, much depends on seasonal conditions and rainfall in the coming months.

Another point producers must consider amid the hype around record offers is that some meatworks may scale back kills or undertake extended maintenance shutdowns if lamb values outpace what consumers and global meat markets can sustain.