Shorn lamb in long paddock

A welcome deluge of demand from processors with Chinese orders has helped mutton prices surge this week. Despite the hotpot fuelled celebratory mood in mutton, demand for trade, restocker, and heavy lambs has cooled, with prices dipping even as reduced supply provided support.

The National Mutton indicator (NMI) jumped a massive 43¢ (13%) this week to reach 383¢/kg cwt- almost the highest seen since the start of the year. In the wake of COVID restrictions being lifted in China, the early stages of economic recovery have instilled confidence in Chinese buyers, resulting in a strong flow of new orders.  This is opportune timing for buyers as price levels are 33% below that of the same time in 2022.

To put the strength of demand into perspective, eligible sheep included in the index this week was up 40% on the prior week, and yet prices still surged despite the strong influx of supply. Ballarat, Hamilton, and Forbes contributed to 45% of the index, achieving average prices of 400¢/kg cwt, 378¢/kg cwt, and 474¢/kg cwt respectively.

The Eastern states Trade Lamb Indicator (ESTLI) shed 26¢ (3%) for the week, closing at 745¢/kg. This was despite indications of weaker supply this week, with 18% fewer lambs contributing to the index this week. This points to softer demand this week, as prices fell despite the support of lower numbers, with the eastern restocker lamb index also slipping 8¢(1%) to close the week at 672¢/kg cwt.

East coast heavy lamb prices also took a hit, dipping 12¢ (3%) to close at 788¢/kg, even with the tailwind support of a 13% fall in yardings compared to this week.

Reports out of Wagga indicated that lamb exporters and supermarket buyers were less enthusiastic in their bidding.  Competition was weak, despite a good quality offering, with heavy lambs weighing in at over 30kg cwt attracting relatively more attention.  A similar trend toward interest in heavyweight lambs was observed in Ballarat also.

Yardings on AuctionsPlus were up marginally from last week, with 87,171 head of sheep and lambs offered for the taking. These numbers were up 32% in NSW but were counterbalanced by a 45% dip in SA listings. Reflecting the general trend toward quality, a strong 87% clearance rate was achieved across a yarding of 18K crossbred lambs.  Merino wethers also sold well, with 95% of the 10K head that was on offer selling. In contrast, interest in first cross ewe lambs on the platform has been subdued, with less than 37% of the offering selling.  Prices were landing across a wide range, reflective of selective buying.

On the demand side, last week’s slaughter numbers continue to be indicative of a strong and healthy upward trend. Lamb slaughter at 349K head was 4% above the same time last year, and 9% above the five-year average. Sheep processing, at 135K head last week is also in relative overdrive, being up 26% on the prior week, 52% above the same time last year, and, more pointedly, 26% above the five-year average.

The week ahead….

With sheep slaughter showing incredibly strong volumes at present, it’s clear that our attractively low prices and pent-up demand from Chinese consumers have instilled a lot of confidence in export buyers recently. As mutton prices rise, we can expect some of that demand to fall back.  In the meantime, it will help clear the paddocks of sheep, constraining future supply and supporting prices further out.

On the flip side, mutton slaughter is potentially crowding out further upside in kill space for lambs, suppressing demand.  Interest in quality and heavy lambs looks to be a trend that will remain for some weeks as buyers continue to be more selective.

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Data sources: MLA, Mecardo

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