Just when we thought 1200¢ was too much for lambs, and the market started to wane, last week saw a bounce that again raised the hopes of lamb producers. Here we take a look at some historical price trends and try to find a path for prices.
A ‘dead cat bounce’ is a temporary recovery in prices, which in share markets is often caused by speculators covering positions. In livestock markets, we see the ‘dead cat bounce’ when supply increases while prices are strong, pushing values lower.
The following week, producers can baulk at the weaker returns, opting to keep stock at home and put on more weight. This is especially the case at this time of year, when grass supplies are on the increase.
Figure 1 shows the Eastern States Trade Lamb Indicator (ESTLI) recovering almost all of the decline seen in mid to late August, returning to 1200¢/kg cwt.
Looking at the five-year average price in Figure 1, the 6% August decline we saw this year fits closely with the average 7% fall from the winter peak. The average, however, does not show a recovery like the one we saw last week.
In July and August 2024, we saw the ESTLI decline from peaks, followed by a small recovery before largely tracking sideways for the rest of the spring. In 2022, we saw a late winter price decline, followed by a bounce that was sustained.
In 2018 and 2019, there was no bounce, with price peaks followed by sustained declines through to the end of the year. The price falls in 2018 and 2019 were heavy, in the order of 20–30%. In the forward price article on Mecardo a fortnight ago, the expected decline was in the order of 17.5%.
Supply will be the driver of price from here, and therein lies the uncertainty. New season lambs are coming, but not at the normal pace, and at a slower rate than last year, if we look at lamb slaughter rates (Figure 2). In 2024, we had to wait until the second half of October for a significant lift in lamb slaughter.
Meat and Livestock Australia’s (MLA) Sheep Industry Projections will be out in the coming weeks, which might provide some clarity on lamb supply. However, based on anecdotal evidence, and with the flock rebuild at play, it’s hard to see lamb supply outstripping last year through to the end of 2025.
What does it mean?
When prices are at extreme highs, volatility can be expected, and we are seeing this play out. A 20% decline is not unusual, but historically, it is the limit of spring declines. This gives a potential low of 1000¢. Those holding new season lambs to put on weight should be running the numbers on the gain in value from weight increases, versus the loss in value from potential price falls.
Key Points
- Lamb prices have bounced from the August decline, moving back towards record highs.
- Such strong bounces at this time of year are unusual.
- Historic trends are varied, with prices going forward being tightly tied to lamb supply.
Click on figure to expand
Click on figure to expand
Data sources: MLA, ABS, Mecardo
