It appears lamb restockers are taking a more cautious approach despite widespread rain last week. Restocker lamb price movements have been relatively benign, but they remain at a solid premium to the finished variety, making trade opportunities limited.
New South Wales restocker lambs have rallied on the back of last week’s widespread rain, likely helped by a similar lift in finished lamb prices in saleyards. Figure 1 shows the NSW Restocker Indicator lifted back above 1000¢/kg cwt early this week. It’s not a new record, despite the feed situation – a few factors are holding it back.
With preparation for sowing the winter crop well underway, demand from that sector of the market has dwindled. There are still plenty of understocked sheep producers in NSW however, and that is what is keeping the premium at 150¢ to the ESTLI, well above historical levels. In fact, since spring 2020, restocker lamb prices have been at record premiums to finished lambs (Figure 2).
The limitation on restocker lamb prices rising remains the prospect for higher finished lamb prices. There is plenty of conjecture about where prices are headed from here. Normal seasonality sees the ESTLI track sideways through April and into May, so lambs bought now might have to be held until June to see prices with a 9 in the front.
Figure 3 shows the margins on taking lambs from 35 to 50kgs liveweight. As we have seen since last spring, steady lamb prices will see a solid profit if lambs are finished on grass. However, lambs going onto full grain rations will need a price rise to see a profit turned.
A lift to 900¢ would make restocker lambs bought at 1000¢ or $160 per head look like a great trade, and a profitable one for grain-finished lambs.
There is some danger that lamb prices can fall, but with the recent rain that is likely dissipating. Female lambs and merino wether lambs are more likely to be held through the winter. These are the lambs that can boost kills in autumn when the season isn’t as favourable.
What does it mean?
There is still money in growing out lambs, if feed is relatively cheap. There is also the prospect of higher finished lamb prices, which would drag restocker prices higher, at least until we were within range of the new season lambs hitting the markets.
There is still risk in buying restocker lambs, especially if finishing on grain, but lower prices seem unlikely given the supply dynamics we are likely to see over the coming months.
Key Points
- Restocker lamb prices have risen in NSW with the recent rain but remain below records.
- In NSW Restocker lambs are at a strong premium to the ESTLI, but can’t move to a new level.
- If feed is cheap there is still money in growing out lambs, until new season lambs are forthcoming.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, Mecardo
