Sucker season is upon us in NSW, and despite the volatility of the lamb market continuing week to week through July, the general upward trend has created a bit of positivity for producers as we head for spring.
Dry conditions in the more southern states
could see new season lambs hit the market later than usual, or held over,
depending on what spring brings in terms of rain. The Eastern States Trade Lamb
Indicator has finally been doing what is expected of it, which is to rise
during the winter, and while traditionally prices now start to fall away, they
will dip from a much better level than this time last year.
Last week, the ESTLI averaged 817¢/kg,
which was 8% stronger than the five-year average for the corresponding week,
and 15% above the 10-year price. The shorter average has the ESTLI sitting
within about 30¢/kg of the current price through to the end of spring, where it
ends about 4% lower. The longer average follows a similar pattern but is
ultimately 7% lower by the time December rolls around. The current weekly
average trade lamb price is 40% above the same week last year. Last year, we
saw the ESTLI sitting at near on the exact same level after spring as it was
this week, however mid-September it was down by about 13%. It got back to usual
trading terms for a few months, before bucking the trend and losing ground
again in February.
If we look comparatively further back, the
2023/24 financial year trade lamb indicator average price was just short of
585¢/kg, which is the lowest it has sat since the 2015/16 season. That year is
also relevant as the 2014 and 2015 years were the last time we saw lamb
slaughter up near 2023 and 2024 levels. In 2015, the spring ESTLI price fall
was pretty much right on trend at 15% from now through to November.
We also recently looked here at how throughput-wise, the lamb market
could be shaping up much the same as in 2018 and 2019, with stronger slaughter
numbers in the first half of the year. This comparison is supported by the fact
that due to the poor season in many lamb-producing areas, suckers could be late
to finish – or directed into another market altogether, be it store lambs or
held over and finished next year. In 2018, trade lamb returns fell 12% between
now and the end of spring, after a quick price hike in August. In 2019, the mid-winter
premiums were slightly stronger, which equated to a dip of 18% by the time
summer arrived.
What does it mean?
If we use a rough average of what the above trends are telling us, and the Eastern States Trade Lamb Indicator sits say 15% lower by the end of spring, producers should expect to sell lambs in the 690-800¢/kg range over the coming months. This puts prices below the five-year average given the bumper years that occur in those 5 years, but still above the longer-term return.
Expected continued strong supply will stop any significant overall upside to this one you would think, but there could be a substantial premium for well-finished trade stock late in the spring if the season inhibits producers in the south from finishing lambs.
Key Points
- Eastern States Trade Lamb Indicator finds better footing in winter rise, sitting above both the five- and 10-year averages.
- Spring sucker surge is likely to bring about the usual price dip, however from much stronger levels than last year.
- Significant price premium for quality suckers could emerge later in the year if throughput from the south is lacking.
Click on figure to expand
Click on figure to expand
Data sources: MLA, Mecardo
