Peak to trough price moves in meat and wool

northern cattle

Beef prices down 50% on recent highs, lamb down 56%, and merino wool down 40% on 2018 highs are not a welcome combination. This article looks at the past 50 years to put these down cycles in a historical context.

Every commodity price cycle or price trend varies in some way, as the saying goes “History does not necessarily repeat but rhymes”. One way of looking at price movements is to measure the range from trough to peak (rises) and peak to trough (falls), without going into the minutiae of what has driven the particular price cycle, without being an expert in the particular commodity being reviewed if you like. The other saying for commodities, about how “prices tend to halve and double” fits neatly into this sort of analysis.

To begin with, Figure 1 shows a Queensland medium cow price series from 1970 to now, in nominal Australian cents per kg terms. Nominal is used in this instance as we are interested in the peak-to-trough fall in price, shown by the red bars rather than comparing the price series across time. The peak-to-trough bars show the rolling change in price compared to the highest price level of the preceding five years. The choice of five years is subjective.

In Figure 1 the price is currently down 50% on recent peak levels, which matches or exceeds most of the falls in price seen since the mid-1970s. Nothing matches or comes close to the disastrous mid-1970s when prices were down 70-80% on the 1973 peak levels. This series is for finished cattle so a store price series would probably show even larger falls at the time.

Figure 2 repeats the exercise for an NSW trade lamb sale yard price series. The current price is down some 56% on recent peak levels, about the tenth time the lamb market has done this since 1970. One of the key differences this time is that it is 11 years since the last such fall in price and since then the lamb prices have enjoyed a strong uptrend in price. The strong uptrend in the lamb price really began around 2000 and has a strong negative correlation with the combined decline in sheep meat (lamb and mutton) in key developed countries such as New Zealand, the USA, the UK, Europe, and Australia, with Australia bucking the trend on its own but not enough to offset the combined decline.

Usually, the lamb price rebounds between 25% and 50% of such a big peak-to-trough decline relatively quickly, so the prospects for 2024 look appreciably better than they do currently.

To round out the commodities, Figure 3 looks at the peak-to-trough falls in the merino (average micron) price. The current market is down some 40% on 2018 peak levels which is substantial but appreciably less than the mid-1970 and early 1991 (post Reserve Price Scheme collapse) falls. In the period from the late 1970s to 1987 (the height of the RPS) there was little downward movement in price due largely to the exchange rate. In US dollars it is a different story.

What does it mean?

The extensive commodities produced on Australian farms remain commodities, with all of the price variability that entails. High prices reached in the post-eastern drought period of 2020-2021 have accentuated the size of the price fall seen since late 2021. History indicates the lamb price should recapture 25-50% of its fall in a reasonably short space of time.

Have any questions or comments?

We love to hear from you!

Print This Post

Key Points

  • While individually the three commodities (beef, lamb, and merino wool) have had plenty of serious falls in price during the past 50 years, the current downturn is second only to the mid-1970s.
  • For lamb this is the tenth fall in the order of 50% (peak to trough) since 1970.
  • Lamb usually recovers 25-50% of the fall reasonably quickly.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: AMB, MLA, BAE, AWC, WI, AWEX, ICS, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!

Goat and sheepmeat correlations

The drop in meat prices since mid-2022 has affected beef, lamb, mutton, and goat. This article investigates the relationship between goat meat prices and other

Read More »
Percentiles with a background image of hay bales

Percentiles – May 2023

Mecardo’s Percentiles update for May 2023 Click below to view the latest report Grains Oilseeds Sheep and Lambs Cattle Wool Dairy Fuel Percentiles are an important

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.