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.

Have any questions or comments?

We love to hear from you!

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

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Sheep in green hilly paddock
Sheep

Restockers required

Restocker lambs have opened the year as one of the hottest commodities, surging higher as producers, feeders and processors compete for whatever livestock they can

Read More »
Image of shipping containers at sea
Sheep

Australia doesn’t lamb alone

The annual Australian Lamb summer campaign launched the industry’s domestic marketing campaign for 2021 and so far seems to have hit the right note with

Read More »

Don’t have an account with us? Join free.

You can have full premium access to all of our content with a monthly or annual subscription. 

Alternatively, create a free account to access our Insights blog and two free premium article a month!

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
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.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

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.