The typical flooding rain response


The rains afflicting the eastern states are not letting up, and it seems to be having an impact on lamb supply. Even slaughter data for last week has failed to be updated, which might have something to do with the pressure processors are under at the moment. Markets are reacting in typical fashion, although restockers are a little slow. We want to know what this means down the track.

Heavy and prolonged rain make livestock transport difficult.  Everything from mustering stock, to getting trucks in to collect them becomes more difficult.  Processors can’t easily slow down, especially in the middle of spring, so they have to find stock where they can get them.

Lamb prices are up at saleyards, but it isn’t really a big price spike.  Figure 1 shows the Eastern States Trade Lamb Indicator (ESTLI) has gained 30¢ over the past two weeks to move just above 800¢/kg cwt for the first time since June.

The ESTLI price chart is looking remarkably similar to 2020, but the factors driving it are different. 

The different drivers are explained by the restocker chart.  Figure 2 shows the NSW Restocker Lamb Indicator.  While the NSW Restocker is trading at a small premium to the ESTLI, sitting at 837¢/kg cwt this week, it is well below the levels of both 2020 and 2021. 

Normally good rainfall sees strong demand for restocker lambs, as few are sold, and plenty demanded.  The current lamb shortage is confined to the kill sector.  Many lamb buyers would be too wet to bring lambs in, let alone put through induction programs.

Store lamb prices on AuctionsPlus are also a little lacklustre.  AuctionsPlus is still at a premium to the indicator, but there are plenty being passed in, and prices are down on August’s levels.

Breeding sheep are also suffering from a lack of demand.  While there are plenty still selling on Auctionsplus, prices are no where near the records of the last two springs. 

What does it mean?

While we are likely seeing a spring peak for finished lambs, with supplies to improve with the weather.  There is a school of thought, however, that the lack of sun will push back the supply of finished lambs further.  This could see further upside for prices, but with weaker values later in the year and early in 2023.

Restocker and breeding sheep look like they might have some upside, with prices weak relative to finished lambs, and demand being impacted by floods. 

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Key Points

  • The ESTLI has lifted back above 800¢ this week on the back of tight supplies.
  • Restocker lambs and breeding sheep are cheap relative to the last two years.
  • As the weather improves, there is downside for finished lambs, and upside for restockers.

Click on figure to expand

Click on figure to expand

Data sources: MLA, Mecardo

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