Adding some weight to the Merino lamb trade

The humble Merino wether lamb has come a long way. The once hard to trade commodity is now a serious asset to a Merino producer, and an opportunity to a lamb finisher. Big numbers are coming onto the market out of Western NSW and the Riverina, and the lambs have had an exceptional start to their lives. Some of the “top” drafts of wether lambs have already found their way directly to the processors, however the “un-finished” lambs this year are in very good order. Those with spare grass or stubble about might be considering buying Merino lambs to grow out, so lets take a look at the numbers.

The NSW Merino lamb Indicator has enjoyed the recent market rally as much as any other lamb category. The indicator has lifted 27% in the last 2 months, to where it is currently sitting at 768¢/kg cwt.

To buy Merino wether lambs on AuctionsPlus last week in the 30-35kg lwt range, you’d be looking at around $125 per head. There are reports of well-bred second and third lamb drafts fetching $140 to $150 per head, but for this scenario lets stick with the $125 price tag.

This seasons Merino lambs are well advanced and have had a solid start to life. Although weight gains are slower compared to crossbreds, the good season will mean spring Merino lambs could be shorn in January for a 3kg greasy fleece.

While wool and lamb weights will be above average, it’s the wool price side of the equation that’s dragging down margins on the Merino lamb trade compared to the last time we ran the numbers. The wool price for January 2021 can be locked in with 19 micron bids currently at 1,190¢/kg clean. The wool value from a Merino lamb can therefore be locked in at $25 per head.

Now to the sale price. In early Autumn we can expect lamb prices to be slightly stronger than they are now, however across our three possible price scenarios we have put the weak price in at 700¢, mid price at 750¢ and strong price at 850¢ cwt.

Those with feed to spare aren’t likely to finish their lambs on a ration but we’ll add in a full ration feed cost as an option to the margin. To get the lambs to weight we are allowing a conservative 120kgs of feed at $380/t on a full ration. This would mean a cost of around $45 per head to feed.

Note: Be sure to listen to last weeks episode of Commodity Conversations, where we spoke with Ron Rutledge about where the lamb trading opportunities are Listen HERE.

What does it mean?

Even at the weak sale price, a margin without feed costs of $59 is very attractive. This calculation doesn’t take into account additional costs of shearing, labour, animal health etc but there is still plenty to go around.

To feed lambs a full ration will eat into the margin and adds risk to the trade at a weak price. Although by the look of paddocks and the wet forecast, few will be relying on a full ration of feed to get lambs to weight.

The modern Merino lamb genetics are now producing wether lambs highly suitable for meat processors, so if a trader has feed (grass, stubbles or grain) these lambs will provide an opportunity to supply processors in the new year at acceptable margins.

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Key Points

  • It’s store lamb selling season in Western NSW and the Riverina, where lambs are selling very well.
  • A strong lamb market, and abundant feed is supporting lamb values, but lower wool prices are dragging away some margin.
  • If a trader has feed, these lambs will provide an opportunity to supply processors in the new year.

Click on graph to expand

Click on graph to expand

Data sources: MLA, Riemann, Mecardo

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