We’ve been looking for it for some time, and it has finally arrived. The winter price rally was late, with lamb supply holding strong through autumn and early winter thanks to seasonal conditions. In the last fortnight the supply and demand equation has moved in favour of producers, but how long will it last?
After last
year’s consistent price declines all the way through winter, it does offer somewhat
of a confidence boost to lamb producers to see prices on the rise, even if many
have nothing to sell. When we have
winter price premiums, it is always a race for those with autumn lambs to get their
stock up to weight before prices start to slide.
Figure 1
shows how the Eastern States Trade Lamb Indicator (ESTLI) has performed over
the last year, along with our benchmark for this stage of the flock cycle, 2018-2019.
The
question we have now is whether we are following the 2018 trend, with prices
set to rise or hold through to September.
Or are we closer to 2019 and the five-year average, where the price peaked
in mid-July and eased from there?
Figure 2
gives a good idea of where supply might be headed. In 2018 the lamb slaughter built for the
first half of the year, peaking in June, then declining sharply in July, August
and into September. Again, the slaughter
trend for 2024 has been eerily similar to 2018.
This year
we’ve had extreme dry conditions in large parts of Victoria and South
Australia’s prime lamb country, including the early lamb area. In NSW the season has been highly variable,
with some reports of country being too wet and impacting lamb growth rates.
Meat and
Livestock Australia’s (MLA) Lamb Producer Survey for May reported nearly 1
million fewer lambs on hand, and slaughter rates have been much stronger since.
When you account for ewe replacements, this tells us old season lamb supply
must be nearly spent.
Demand
remains strong, with record processing capacity, but many processors have the
option of switching to goats, so there will be an upper limit on lamb
prices.
What does it mean?
While there is an upper limit for lambs, processors will still have to pay up to secure available supplies. It looks like they might have to pay up for some time. In 2018 lamb prices peaked in the last week of August, and it might be even later this year.
Suckers which traditionally start to flow in September will likely be delayed, and there will be fewer lambs this season in total. It could be nearing mid-November before we see lamb prices below 800¢/kg cwt again.
Key Points
- Lamb prices have finally had their winter price rise, but how long will it last?
- The supply of old-season lambs is in decline, with new-season lamb likely delayed.
- It could be November before lamb prices move under 800¢ again.
Click on figure to expand
Click on figure to expand
Data sources: MLA, ABS, Mecardo
