Extending restrictions to see a backlog build


A basic reading of the ‘Covid Roadmap’ tell us that livestock processor restrictions aren’t going to be lifted until at least late November. While the situation is obviously fluid, and could change tomorrow, under the current arrangement either there are going to be very few sheep killed, or we are going to build a serious backlog of lambs in coming weeks.

We have seen lamb prices find a floor in recent weeks, the slaughter stats released by Meat & Livestock Australia (MLA) this week showed Victoria found a bit more room for lambs last week.  With slaughter rising and prices rising, it suggests the market might have found a level where it can be moved into export markets.

There might be a little more room for slaughter to rise, with total Victorian sheep and lamb slaughter last week at 59% of last year’s peak, there is another 6% to reach the 65% of full capacity (set in February) level.  Figure 1 shows that another 6% is still going to leave Victorian sheep and lamb slaughter well below last year.

Figure 2 shows that despite the restrictions, east coast lamb slaughter hasn’t fallen far behind last year.  The main reason lamb slaughter remains relatively strong is that sheep slaughter is well back.  On the east coast last week sheep slaughter was down 44% on last year.  This equates to 56,000 head, and this accounts for almost all the sheep and lambs which can’t be processed in Victoria.

The big question is, can the coming flush of spring lambs be slaughtered? The blue ‘Covid Restricted’ line on figure 2 shows how many lambs could be slaughtered if all processors are operating at full capacity in other states, and Victoria is at 65%.  Additionally, and importantly, it assumes sheep slaughter remains at current low levels.  This is unlikely, as even in rebuilding years sheep supply increases in spring and summer.

Figure 3 shows how many slaughter ready lambs will accumulate if processors are restricted to levels shown in figure 2.  We have a forecast for both supply similar to 2019, and the five year average.

What does it mean?

Much depends on supply, figure 3 shows that if lamb supply is similar to 2019, the backlog won’t be too hard to work through when restrictions are lifted.  If lamb supply is closer to the five-year average, by the middle of November there could be 300,000 lambs, or 75% of a peak slaughter week, which will have accumulated.

In terms of price, restrictions are not good for lamb or mutton.  At the moment it seems mutton is feeling the pressure, as processors allocate space to lambs. For those with stock to sell, sooner is likely better than later, unless later is much later, as in 2021.

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Key Points

  • Victorian slaughter restrictions have yet to see much of a backlog build, but fewer sheep are being slaughtered.
  • Lamb slaughter is due to increase further, but restrictions remain in place for now.
  • A lamb backlog depends on how supply grows from here, for both sheep and lambs.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources:  MLA, Mecardo

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