We are nearing the end of spring, and it’s this time of year when Victorian lamb supply ramps up. In theory, increasing supply should lead to lower prices, but we’re seeing prices tracking sideways or even strengthening. Stronger demand appears to be matching the supply flush, at least for now.
The spring lamb flush is late and low at this stage of spring. Victoria and South East SA are the drivers of the massive rise in lamb yardings late in the spring, and we can see in Figure 1 that it has taken until almost halfway through November to see a decent uptick.
Last week Victorian lamb yardings increased by 47% to move past 60,000 head for the first time since May. We can see in Figure 1 that the rise was two weeks later than average, and later than last year. Victorian lamb yardings tend to continue to rally, peaking in mid December somewhere around the 150,000 head mark.
We can expect lamb yardings to continue to rise, but there remain plenty of questions around supply. Are lambs simply late this year, or were they not marked in the first place? We might get some answers when the results of the October Sheep Producer Intentions Survey are released.
Lamb slaughter has also picked up from the winter and early spring doldrums. Figure 2 shows east coast lamb slaughter rallying to 386,000 head before declining in Cup Week. Since the start of the financial year, east coast lamb slaughter has been down 15% on last year. This is a significant decline and again leaves us to ponder if lambs are late or not there at all. It’s probably a combination.
The increase in lamb supply has done little to dampen prices. Slaughter capacity has been increasing to cater for the expected supply flush. The fact the flush is slow is likely why prices have improved. Processors are needing to bid up for lambs at saleyards because there aren’t as many as might have been expected.
Export lamb prices have also been on the rise. Figure 3 shows the price of a couple of the larger volume cuts of Australian lamb exports to the US. Fortunately the US Government shutdown didn’t impact these reports, and we can see prices have been on the rise.
What does it mean?
Lamb producers are enjoying record prices for this time of year amid a strengthening supply. Strong export markets are helping support lamb prices and encourage competition from processors at the saleyard level. There could be some potential downside with further increases in supply, but we are a long way from reaching the slaughter capacity from earlier in the year, so lambs can continue to be absorbed.
Key Points
Lamb supply has increased but is running behind last year’s levels.
Prices remain strong as processing capacity has increased in anticipation of increased supply.
Strong export lamb prices are helping support processor competition at saleyards.
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Click on figure to expand
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Data sources: MLA, USDA, Mecardo
