It has been a pretty devastating weekend in many Victorian sheep-growing areas, with fires raging through some prime sheep and cattle country. The consequences will no doubt create some short-term local market issues. With flock rebuild and potentially better rainfall year in the south, we take an initial look ahead for the year.
Lamb markets have opened up marginally weaker than they finished 2025. Those holding lambs in the hope of a first-week spike will be disappointed. As disappointed as you can be when receiving record values for this time of year.
Figure 1 shows the ESTLI sitting 33% higher than this time last year and 20% higher than the previous January peak set in 2022. We can also see in Figure 1 that the average trend for the New Year has been for prices to edge lower.
The proliferation of grain feeding and increasing target rates to fit lamb grids has seen somewhat of a shift. Peak supply used to come in late spring and early summer, now lambs are carried through to heavier weights, evening out supply and pushing it further into the New Year.
While lambs have opened slightly weaker, mutton has opened slightly stronger. In terms of increases on last year, mutton has even beaten gold for price rises. Gold is up 66% on this time last year, and the National Mutton Indicator (NMI) has basically doubled, or gained 100%. Tell the fund managers to put mutton in their portfolios.
Figure 2 shows mutton generally remains steady through summer and autumn, before increasing in winter. Figure 3 shows the NMI discount to the ESTLI. We can see that rising lamb prices have helped drag mutton higher, but mutton has narrowed the discount considerably.
During the last sheep flock rebuild, mutton made it within 20% of the lamb price. At the current lamb price, this puts mutton at 840c/kg cwt. Maybe more likely is lamb falling to 950c/kg cwt. Or it could be a bit of both.
What does it mean?
In the coming weeks, we will get some slaughter numbers and a better idea of how supply is playing out early in the year. We know that there should be fewer lambs to market this year, with a flock rebuild keeping ewe lambs at home, but we are also unlikely to see a supply squeeze.
Key Points
- Lamb markets have opened slightly cheaper, with mutton a little stronger.
- Average price movements suggest weakening lamb prices and steady mutton.
- Mutton still has a little improvement relative to lamb to get back to 2021 levels.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, Mecardo
