Restocker lambs have been trading at or around the same levels as last year for almost the entire summer. Last week, however, restocker lambs hit a speedbump in saleyards, and plenty were passed-in online. Falling finished lamb prices are partly to blame, but rising grain and uncertainty might be playing a part.
Restocker lamb prices are relatively predictable, if you know what the finished lamb price is. Restocker lambs obviously trade at a discount to finished lambs in dollar per head terms, and usually at a premium in ¢/kg terms. The size of the premium comes down to how much it costs to turn a finished lamb.
Figure 1 shows the year on year National Restocker Lamb price, with the heavy fall seen last week taking it to the lowest level for the year, except for the first week which was artificially low. The 8% fall in saleyard restocker lamb prices was driven by a heavy 9% fall in Victoria, with NSW values holding stronger.
Victorian Restocker Lambs were at just an 18¢ premium to the Eastern States Trade Lamb Indicator (ESTLI) last week. When we look at a long term chart of the NSW premium, it is still close to 160¢. This makes Victorian restocker lambs look very cheap.
The major lamb regions in Victoria haven’t been afflicted by the flock reduction and subsequent rebuild. As such, there is likely still the usual supply of lambs coming, and demand isn’t there to match at the moment. With strong supplies of finished lambs, there is also little competition from processors for the lighter end of trade lambs.
Figure 3 shows some rough margins on trading lambs at the moment, and for those with cheap feed, there is still good money in buying store lambs at 900¢/kg cwt. Lambs being fed a full ration will need the price to hold around 800¢ to turn a profit.
What does it mean?
If we put the Victorian restocker price in, the margins look much healthier, and it’s probably going to see fewer light lambs in saleyards in the next couple of weeks. The obvious question is whether finished lamb prices are going to get any weaker. Last week’s move lower for restocker prices was an adjustment to lower finished prices, but there could be a lift based on rain and opportunity over the coming weeks.
Key Points
- Restocker lamb prices weakened last week in response to lower finished prices
- Victoria has the cheapest restocker lambs driven by strong supply.
- The cheaper restocker lambs might provide opportunity for those with feed.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, Mecardo
