Lamb producers who missed out on the extreme prices of the winter are now able to cash in on store lamb values, which have never been this strong, whether it be at this time of year or ever. Do we take the money, and is there value in growing out lambs this year?
It took a little while for restocker lambs to catch the extreme finished lamb prices, but this is not unusual in winter.
Through July and August, the National Restocker Lamb Indicator (NRLI), shown in Figure 1 with the Eastern States Trade Lamb Indicator (ESTLI), is made up of old-season lambs with limited time to finish. As we move into September, more new-season lambs enter the indicator, and it has recently been trading at a slight discount to the ESTLI.
Figure 1 shows restocker lambs are making around 12% more than in the heady days of spring 2021. There is a marked difference in confidence in the season this year compared to 2021. Back in 2021, spring was good across southern sheep areas and pushed restocker lambs to a premium to the ESTLI in ¢/kg.
The wariness about spring cutting out through the south has restocker lambs at a discount to the ESTLI in current markets. This is not to say there aren’t some extraordinary ¢/kg prices being paid at the moment. On AuctionsPlus, some mixed-sex crossbred lambs under 35 kg have made in excess of 1,400¢/kg cwt.
Trading lambs is a dollars-per-head game, so it makes sense to compare pricing on that level. Figure 2 shows the historical premium of finished lambs at 24 kg over restocker lambs at 16 kg. Apart from the winter peak, we’ve never seen a larger $/hd difference between store lambs and finished lambs.
For those working on a ‘sell/buy’ system, where finished lambs are sold and replaced by store lambs, the margin has never been better. For lamb producers looking at $190 for store lambs and wondering whether to sell or finish, the equation is a little different. They need to factor in changes in prices.
Figure 3 shows a basic trading budget for finishing lambs. If producers have feed in front of them, there is still good money in growing out lambs, even if prices decline back under $10. At better sell prices, feeding lambs on grain becomes profitable.
Note. This trade scenario calculation does not allow for cost such as freight, administrative costs and uses an assumed cost of feed, these will vary between enterprises and should be calculated on a case-by-case basis when considering any trade.
What does it mean?
It’s important that those deciding what to do with lambs do their own trading and feed budgets, but the broad view is that the extremely good value achieved for every kilogram gained will outweigh paying or forgoing the record store lamb prices. Feeding lambs is a different story, and depending on your situation, there could be some merit in taking a forward contract if its on offer and locking in margin.
Key Points
- Restocker lamb prices are at a record level and close to finished lamb values.
- Premiums for finished lambs over store lambs are very strong in dollars per head.
- Margins look good for finishing store lambs, even with a decline in prices.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Mecardo; Meat & Livestock Australia
