Vendors waiting for lamb market traction

While about 50c/kg has dropped off carcass values in the past week, it is expected the market could bounce back in a month. See the analysis here.

For farmers wanting to ride out the latest dip in lamb prices, the educated “guess’” is it could take a month for the market to gain traction again.

It has to be termed a “guess” as there are a lot of factors feeding into the current slump, which has wiped about 50c/kg off carcass values in the past week.

Issues at play include the shift of small kill space to more goats and mutton; the demise of summer crops and feed as conditions dry out, particularly in the south; the mental reaction of producers to this price check and whether they will continue to sell into the downturn or withhold stock; the strength of consumer and export demand; and disruptions of public holidays and an early Easter in March.

There was also a trading hiccup last week, which didn’t help the market when some saleyards and stock agencies suspended one buying company after it went out of financial payment terms for stock purchased.

On the attitude of producers, there are signs of a “strong reaction’’ (to use the words of one agent) to this current price downturn, and lamb numbers were cut to less than 10,0000 lambs and just 1850 sheep at Bendigo on Monday.

This slowdown in supply looks like it will be widespread, with a much smaller draw expected for Ballarat yesterday and Naracoorte in SA on the same day, where agents were expecting just 4000.

A significant and quick cut to overall supply could put some momentum back into the market, as there is a certain pool of buyers that rely on the auction system for numbers as they don’t tend to forward buy as many numbers.

Buyers gather at Bendigo sheep and lamb market. Picture: Zoe Phillips

But in a sense, the damage has already been done as the major processors appear to have been able to book up a lot of lamb for the next two to three weeks. The feedback was that they had around 680c to 700c/kg carcass weight on the table (which hadn’t been gaining much traction) and then a burst of hot weather caused summer crops and feed to falter and farmers started chasing kill space.

One export buyer told The Weekly Times the sudden sell-off took them by surprise.

“Everyone was telling us there were no lambs out there, that people hadn’t put out stores, and then there was a big rush to sell,” the buyer said.

“With the numbers we were offered, we kept pulling back the price and they kept coming.’’

On the demand side there has been talk of some companies shifting more production to goats and mutton as a more profitable option, particularly after lamb prices spiked to higher-than-expected levels in January.

The trend is supported by data.

The latest weekly kill figure for sheep was listed at 202,000, according to Meat and Livestock Australia. Such a high sheep kill more than 200,000 only happened twice last year towards the end of spring when mutton prices were extremely low.

The goat kill has also ramped up. The latest weekly slaughter was above 50,000 or more than double the level of 12-months ago. Like sheep, the goat kill is now matching the highest production levels achieved in just a few slaughter weeks of 2023.

The query that arises from all this kill data is the sustainable price of lamb in comparison to other meats, particularly in today’s tougher economic conditions both here and overseas.

The main positive for lamb producers still holding stock is the big sell-off of light lambs to MK or “bag lamb” processors in recent months.

At some point, the removal of a decent pool of lambs from the production chain will have to help support prices.

Xavier Bourke, livestock manager TB White & Sons at Ballarat, is one of many agents who believes the lamb market could return to a more traditional pattern of showing a winter price premium.

“The sell-off of light lambs to processors is something we haven’t seen for four or five years so I think at some point there will be a gap (in finished lamb numbers available to processors),’’ he said.

It all comes down to timing, and while sitting out for a higher price sounds easy, there is also the cost of having to hold lambs on feed while waiting for the market to improve. March could also be tricky with public holidays, Easter, and as people start to sweat the autumn break.

Bottom line: there is good upside potential in the market but, catching it is the difficult part.