Flock of merino sheep close up

Conditions have varied greatly across the East Coast and not all areas are benefitting from recent rain but for those that have it, excess feed is a good problem to have. The destocking that took place in the autumn has given way to a reasonable spring for many areas, with grass now growing quicker than stock can eat it. It’s about this time of year we look at trading merino lambs, and as it turns out it’s pretty timely.

With wool prices in the doldrums, merinos have got that aura around them again. The aura is not a good one, but for those looking for a trading opportunity, it might well be.  Figure 1 shows the discount of NSW and Victorian Merino Lamb Indicators to the Eastern States Trade Lamb Indicator (ESTLI). 

The lines in Figure 1 are four-week rolling averages, as the weekly data is far too messy.  This is saleyard data, but we know that restockers will often compete with processors in saleyards for merino lambs.  In NSW, merino lambs have been trading at almost double the normal discount to the ESTLI. In Victoria, the discount is close to 40%, around 4 times the normal level.  It seems merinos are very much on the nose in the south.

In NSW saleyards, merino lambs made 590¢/kg cwt, or $122/head last week.  In Victoria, the price was 491¢/kg, or $87/head. 

Looking for new season lambs, notably on AuctionsPlus, sales have been relatively few, but there are some good examples.  April drop merino wether lambs have been making between 200¢ and 300¢/kg lwt.  A 34kg merino wether lamb will cost around $90/head.

Figure 2 shows the ‘back of the envelope’ workings on how trading merino wether lambs might work out this year.  The recent bump in the wool price is helpful, and obviously the finer the wool the better the price, but all that needs to be factored into your own working.

In terms of a trade for using excess grass, merino wethers look pretty good.  There are costs to come out of it, but a gross margin of $75/head, under a scenario of weaker wool and lamb prices seems reasonable. 

Note that this trade calculation does not allow for any feed, freight, shearing or administrative costs; these will vary between enterprises and should be calculated on a case-by-case basis when considering any trade.

What does it mean?

The problem with all trades at this time of year is the question of whether the stock will be finished on grass, as feeding stock ramps up costs considerably. This needs to be accounted for and when looking to trade all options should be taken into account. For some, this will be meat breed lambs versus merino, or even versus cattle. Without looking too closely at other trades, on a DSE basis, merino wether lambs look like the pick at the moment.

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Key Points

  • Spring grass growth brings with it trading opportunities.
  • Merino lambs are relatively cheap compared to trade lambs.
  • Trading merino wether lambs looks like it could be a profitable enterprise this year.

Click on figure to expand

Click on figure to expand

Data sources: MLA, ABS, AWEX, Mecardo

Have any questions or comments?

We love to hear from you!
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