Supply strength challenges the status quo

Aerial drone photo of sheep in Winilippe Yards KondoolkaStation , SA by Stefanie Roeske

A notable mix of quality at saleyards is causing an erratic market and dragging down lamb price indicators. Supply to processors is far exceeding seasonal norms, making its impact felt. While the market may appear unpredictable, we know that its supply in the driving seat.

The Eastern States Trade Lamb Indicator (ESTLI) lost 9¢ over the week to end at 586¢/kg cwt. This is 27% below the five-year seasonal average and close to the levels we saw at this time of year back in 2018. In the West, trade lamb prices improved by 22¢ over the week to 471¢/kg cwt.

Heavy lambs continued the downward trend in NSW, held steady in Victoria, and improved slightly in SA. The National Indicator ended the week at 652¢/kg cwt, a very healthy premium above trade lambs.

Restocker lamb prices improved in WA and SA but lost ground in NSW, Vic, and Tas. Restocker lambs in Victoria commanded a strong premium over NSW this week, at 555¢/kg cwt while in NSW restocker lambs traded at 483¢/kg cwt. Merino lamb prices continued to sit on the see-saw, this week on the down run losing 46¢ at a national level to 488¢/kg cwt.

Turbulent is the best word to describe the mutton market at the moment, with large swings in price the new norm. This week the National Mutton Indicator pushed back above the 400¢ mark, after gaining 51¢ over the week.

Slaughter levels remain elevated. For the week ending the 19th of May, lamb slaughter in the east was 386,201 head which is 11% higher than the five-year average for this point in the year. Add to that, the surging sheep supply, which last week was 139,812 head, it’s no surprise that processors are packed.  Eastern sheep slaughter last week was 70% above the five-year average which is 57,000 head higher than the five-year seasonal average. 2014 was the last time sheep slaughter was at these levels in May.

Producers are clearly not content with the recent move lower in the market. For the week ending the 19th of May, saleyard lamb throughput dropped 34% in the east, and mutton 54%. Numbers also pulled back in WA, but not to the same degree. Early reports are showing a lift in yardings this week.

The week ahead….

The AUD has slipped back to 0.65 US¢ which will be making Australian sheep meat look very attractive to overseas buyers at current levels. With the US grilling season just around the corner, export markets might be the source of support needed to soak up the extra supply of finished stock.

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Data sources: MLA, Mecardo

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