Simple price charts tell a story of where prices are compared to recent or longer-term historical values, but sometimes it’s informative to present data from a different view. Here, we present the rapid rise in lamb prices in different ways to assess how current prices might impact supply going forward.
Firstly, a look at demand. Lamb prices were already relatively strong before the latest rally. For much of the first half of the year, the Eastern States Trade Lamb Indicator (ESTLI) hovered around 800¢/kg cwt, a price that was historically high. Strong prices were being achieved despite record supply levels. This tells us demand has improved.
Demand is difficult to measure, but by comparing price with quantity consumed, we can get an idea. Figure 1 shows what we call a lamb demand curve, with price, as indicated by the annual average ESTLI, and quantity, shown as annual slaughter, compared for the last 25 years.
With steady demand, price will move lower as quantity increases, and vice versa. Figure 1 shows plenty of periods where lamb demand is steady. However, every few years we see lamb demand increase, which is shown as price and quantity increasing at the same time.
For 2025, we have used projected slaughter and the average price for the year to date. After increased demand in 2024, it looks like we have seen another shift higher in 2025. To have a record supply and price in the same year is something we haven’t seen since 2015.
Now a look at how lamb compares to wool. The merino wool-to-lamb price ratio impacts production focus on mixed sheep farms, the number of meat sheep and merinos in the national flock, along with the survival of merino wethers past a year old.
Figure 2 shows that while merino wool prices have improved in recent weeks, the ratio of the 19-micron price guide to the ESTLI remains in the doldrums at 130%. Since the 19MPG/ESTLI ratio fell below 200% in 2020, pressure has been on merino flocks, which has culminated in 2025 likely having the lowest merino clip since the first half of the last century.
What does it mean?
Stronger demand for Australian lamb is a strong incentive to grow the flock, which in turn might mean some short-term supply issues as more ewe lambs are retained in the coming years. Stronger demand is also a great indication that prices should remain at the upper end of the historical scale.
With current sheepmeat prices as close as they have ever been to merino wool values, there is no incentive to increase wool production. The incentive is to produce more meat sheep in suitable areas, which will likely see further declines in the merino flock and wool production.
Key Points
- Lamb demand has seen strong growth over the last two years.
- Merino wool prices are at their smallest premium to lamb prices on record.
- Incentive to shift towards sheepmeat production at the expense of wool remains strong.
Click on figure to expand
Click on figure to expand
Data sources: AWEX, MLA, Mecardo
