Record lamb slaughter, price rise

The poor autumn break and official confirmation of a record lamb kill in the first three months of this year has refuelled talk of the possibility of late winter price rise for finished lamb.

The poor autumn break and official confirmation of a record lamb kill in the first three months of this year has refuelled talk of the possibility of late winter price rise for finished lamb.

The Australian Bureau of Statistics has just released the official industry figures for the March quarter, covering the months of January, February and March. It had the seasonally adjusted lamb kill at 7,065,000 head for a record result, and which follows on from the big production run in the last quarter of 2023 of 6,712,000 lambs processed.

Combined, the ABS tally now has 13.77 million lambs slaughtered in the six months from October to March, to be 2.5 million above the same period in late 2022 and start of 2023.

The graphic on this page shows the step up in lamb production which has occurred since mid last year, although it has to be viewed alongside the fact Australia’s sheep flock had also grown and was estimated by industry’s peak body to be at 78.8 million head in 2023. This was a 16-year high for the flock, based on data from Meat and Livestock Australia, and more sheep equals more lambs.

But 2.5 million extra lambs processed in six months is significant and ties into the anecdotal evidence reported at markets of more younger and lighter lambs being sold to MK and bag lamb processing orders rather than restockers.

To date, however, there has been little market price movement for good kill lambs this autumn despite extra numbers leaving the system.

The current saleyard indicator price for heavy lambs is tracking at 665c/kg carcass weight to be well behind the levels five key analysts had predicted back in February as part of MLA’s industry projections.

These analysts, which remain anonymous, had come up with an aggregated calculated guess of the heavy lamb indicator hitting 763c/kg by June (the most pessimistic at 714c/kg and the most optimistic at 843c/kg).

Their outlook for trade lambs was an average of 751c/kg by June (the low forecast being 688c/kg and the high being 853c/kg).

These figures came up in discussion with lamb buyers last week, one declaring the market couldn’t hit in excess of 800c/kg this winter as it was too big a price increase from current levels.

It is a true statement, to a point. Out of the last 10 years the lamb market has improved from May to August in six years, the other four years showing a decline in value – based on NLRS data.

Price gains have usually been modest. But in 2018 the heavy lamb price went from an average of 601c/kg carcass weight in May to an average of 843c/kg in August. Such big swings are a rarity, but the trigger when you analyse data is the season.

The year 2018 was a low rainfall season and part of the Millennium drought, according to the Bureau of Meteorology.

The lack of rainfall this autumn could be a significant factor in how the lamb market transitions from old to new-season stock in the July, August to September period.

With many dryland grazing areas now facing the prospect of lambing down with little to no feed, the supply of good early sucker lambs is going to be compromised.

The possibility of a supply gap between old and new-season lambs is now being talked about as a driver for prices in late winter, although in reality it is too late for most producers who don’t have the option of carrying lambs into July and August due to age restrictions.