The market softened from both a supply
and price point of view. Numbers were
held back and bids were more conservative as the lack of southern rain and 10%
higher YoY exchange rate improvement looks to be resisting the supply squeeze
as we finish summer.
Per Mecardo analysis this week (read more here) , weekly lamb slaughter is 22% lower than this time last year, with supply available at the moment constraining productivity. At the same time Export lambs prices are currently $3/kg cwt higher than the same time of year. A premium is being paid to ensure access to the export lambs that are available, so that processors can keep workers productive and orders can be shipped to willing buyers in the US and elsewhere. In theory this will support saleyard pricing. This of course also assumes that these international buyers are still willing to buy at firm prices.
The recent increase in the aussie dollar to the us dollar impacts the willingness of international buyers to stay firm with import prices. Analysis by Andrew Woods on Mecardo this week (read more here) investigates the impact of exchange rates on Australian commodities. Trade lamb price changes are currently show positive correlations with changes in the exchange rate. Whilst not always the case that these price movements move together, the export markets share of aussie lamb consumption has grown compared to previous years.
Lower supply locally should push prices higher, but at the same time the export end is seeing downward pressure on prices. This pressures margins for the supply chain in the middle. This will likely mean that when we get closer to winter and the traditional price rise period, the upward momentum in pricing reacting to lower supply might not be as extreme as we saw last winter. The exchange rates recent run potentially having more impact on processors willingness to pay for lambs as an input than we normally see over winter.
Fundamentally demand is still strong given prices are smashing it for this time of year but the willingness to push prices now before the run to Easter probably isn’t as strong as the last 2 years.
This week the market looks to have shown some of this logic coming to fruition. Indicative National yardings per the NLRS were down 24% and 13% week on week for lambs and sheep respectively. A downward change in supply. However, trade and heavy lamb indicators also saw declines ranging from 25-33¢/kg when you’d typically expect some price support. Saleyard reports detail strong interest in shorn trade lambs and top end export lambs, but buyers being more selective with the rest of the offering and a lack of restocker interest allowed the softer trend to prevail.
The Eastern States Trade Lamb Indicator (ESTLI) declined 26¢ to 1086¢/kg cwt and the National Mutton Indicator (NMI) improved 18¢ to 781¢/kg cwt.
The week ahead….
Prices have bounced narrowly between $10 and $11/kg which looks to be the path over the next few weeks, ofcourse some rain in the early autumn period would be supportive of price rises.
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Bit of a squeeze?
Per Mecardo analysis this week (read more here) , weekly lamb slaughter is 22% lower than this time last year, with supply available at the moment constraining productivity. At the same time Export lambs prices are currently $3/kg cwt higher than the same time of year. A premium is being paid to ensure access to the export lambs that are available, so that processors can keep workers productive and orders can be shipped to willing buyers in the US and elsewhere. In theory this will support saleyard pricing. This of course also assumes that these international buyers are still willing to buy at firm prices.
The recent increase in the aussie dollar to the us dollar impacts the willingness of international buyers to stay firm with import prices. Analysis by Andrew Woods on Mecardo this week (read more here) investigates the impact of exchange rates on Australian commodities. Trade lamb price changes are currently show positive correlations with changes in the exchange rate. Whilst not always the case that these price movements move together, the export markets share of aussie lamb consumption has grown compared to previous years.
Lower supply locally should push prices higher, but at the same time the export end is seeing downward pressure on prices. This pressures margins for the supply chain in the middle. This will likely mean that when we get closer to winter and the traditional price rise period, the upward momentum in pricing reacting to lower supply might not be as extreme as we saw last winter. The exchange rates recent run potentially having more impact on processors willingness to pay for lambs as an input than we normally see over winter.
Fundamentally demand is still strong given prices are smashing it for this time of year but the willingness to push prices now before the run to Easter probably isn’t as strong as the last 2 years.
This week the market looks to have shown some of this logic coming to fruition. Indicative National yardings per the NLRS were down 24% and 13% week on week for lambs and sheep respectively. A downward change in supply. However, trade and heavy lamb indicators also saw declines ranging from 25-33¢/kg when you’d typically expect some price support. Saleyard reports detail strong interest in shorn trade lambs and top end export lambs, but buyers being more selective with the rest of the offering and a lack of restocker interest allowed the softer trend to prevail.
The Eastern States Trade Lamb Indicator (ESTLI) declined 26¢ to 1086¢/kg cwt and the National Mutton Indicator (NMI) improved 18¢ to 781¢/kg cwt.
The week ahead….
Prices have bounced narrowly between $10 and $11/kg which looks to be the path over the next few weeks, ofcourse some rain in the early autumn period would be supportive of price rises.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: Mecardo; Meat and Livestock Australia
Categories
Have any questions or comments?
Trading lamb equations
Spring has hit, and more new season lambs are coming to market, but prices remain very strong. The restocker lamb indicator kicked last week, with
Here they come
A jump in new season lambs marks the start of spring, and buyers appear to be relieved at the weights and quality of the first
Sheep supply still sceptical
The average National Mutton Indicator price for the June quarter hit a new record this year on the back of plummeting sheep supply and subsequent
Mutton red hot as lamb supply dwindles
There were mixed results in the sheep and lamb market this week as wet weather in the south helped push yardings lower again. Restocker lamb
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.