44% drop in supply springs market into action

Sheep in distance in green paddock

A short week, and closed saleyards on Thursday has culminated in some relief on the supply front as combined lamb and sheep yardings nationally dropped 44% week on week.

The Eastern States Trade Lamb indicator (ESTLI) improved 39¢ to 673¢/kg cwt this week which was 6% higher week on week.  The trade lamb price bounce is representative of the wider lamb market direction this week, with lower yardings (therefore less stock to choose from) creating a competitive atmosphere for buyers whose demand continued its recent trajectory.  

Heavy and Light lambs nationally posted gains of 29-35¢ for the week, with saleyard reports at Ballarat noting strong demand for high quality lambs in these categories.  The National Mutton Indicator (NMI) showed a modest 17¢ improvement to 236¢/kg.

The National Merino Lamb indicator rose 63¢ to 498¢/kg cwt (14% higher week on week).  The improvement in price has no doubt been driven by the decline in throughput of merino sheep to the yards relative to the previous month, but recent rebounds in the wool market couldn’t have hurt either. 

Victorian trade lambs increased 38¢ to 665¢/kg cwt, but NSW fared even better with a 46¢ leap to 684¢/kg cwt. Victorian trade lambs are back where we started a year ago, just 2¢ lower than the same time last year. But what a whirlwind journey they went through, with prices moving 365¢/kg from bottom of the market in September at 414¢/kg cwt to the highs seen in the second week of January at 779¢/kg cwt.

Whilst no one had predicted the complex combination of drivers that would contribute to a highly volatile year, the decline seen in mutton and lamb prices is not without precedent.  As investigated by Andrew Woods this week (read more here) price falls in sheepmeat in 2023 were similar to earlier patterns during the past half a century however price volatility during the past 10-15 years has been lower than in earlier decades, which made the 2023 downturn even more of a surprise.

Next week

With the outlook not predicting any meaningful rainfall events in the next few weeks, it likely that restockers won’t be bringing their umbrellas or chequebooks to the yards (the restocker indicator lost 64¢ this week).

Slaughter remains elevated but in a typical cycle we would begin to see slaughter ease into Winter. However the previous two seasons we have seen this cycle impacted by the onslaught of supply. How this season reacts is yet to be seen but slaughter capacity is well placed compared to this time last year to handle more stock.

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Data sources: MLA, Mecardo

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