Processors pinched but no plummeting prices

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Looking at prices across the lamb & sheep market, you could almost be forgiven for thinking that it was all smooth sailing. In reality, we know that processing capacity is limited, and supply chains are stretched, but the seasonal conditions will continue to support market fundamentals.

The Eastern States Trade Lamb Indicator (ESTLI) ended last year at 854¢ and has closed this week slightly down at 849¢/kg cwt. In the West, the trade lamb Indicator at 819¢, which is 6% stronger than where it left off in 2021.

While trade weight lambs still received reasonable interest, it was the heavy lambs that felt the brunt of the processing limitations. The National Heavy Lamb Indicator ended this week 27¢ or 3% lower than the previous report in December.

Restocker lambs continued to see support in the opening sales, unsurprisingly given the extent of the rainfall in the east in recent weeks. The National Restocker Lamb Indicator gained 9¢ or 1% from last year, to close the week at 919¢/kg cwt.

Mutton made solid gains over the holidays, correcting the loss in the last week of sale in 2021. The National Mutton Indicator closed this week at 620¢/kg cwt, which was a 22¢ lift on the prior result in mid-December.

We took a detailed look at the first week lamb and sheep slaughter figures earlier in the week (read here). Compared to the same time 12 months ago, east coast lamb & sheep slaughter was 34% lower. Taking into account the public holiday, we would normally expect a 20% decline so it’s clear that Covid amongst workers is impacting processing capacity.

The week ahead….

On the positive side of things, we know demand is out there, particularly if MLA’s Australia & Westralia Day lamb campaign works its magic. How long the disruption to slaughter may last is anyone’s guess at this stage, and who misses out on the end product is another question. This is likely to limit price upside, but with underlying fundamentals strong the medium-term outlook is good.

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Data sources: MLA, NLRS, Mecardo.

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