Spring has hit, and more new season lambs are coming to market, but prices remain very strong. The restocker lamb indicator kicked last week, with supply seemingly an issue for those looking for lambs to grow out or feed. Here we take a look at whether store prices might be too good to hold stock.
There are different markets within what we would normally call the ‘store lamb market’. The NSW Restocker Lamb Indicator (figure 1), which jumped by 100¢ last week is lambs sold in prime saleyards to restockers or feeders.
You can delve deeper into the data, and we can see that last week it was both merino restocker and non-merino restocker lambs which jumped. Merino restocker lambs were priced at 1143¢/kg cwt, as opposed to non-merino lambs at 1272¢/kg cwt.
The Online Lamb Indicator (OLI) is dominated by old Merino lambs and Merino suckers out of the Riverina, which are priced at $219/hd and $234/hd respectively. Crossbred suckers were a small portion of the indicator and made $237/hd last week.
Ewe lambs for breeding, mixed sex first cross suckers and Merino ewe lambs are making premiums of up to $100/hd over restocker lamb indicators as grass fever sets in.
Whatever it is that lamb producers are holding, we know that prices have never been stronger at this time of year. We also know that buying store lambs last spring and growing them out on green feed or grain was a profitable enterprise. The fear of missing out could be impacting current grower decisions.
Figure 2 shows a basic trading calculator for buying store lambs at current prices, adding 20kgs and selling in 12-16 weeks’ time. Finished lamb prices below 1000¢/kg cwt would see feeders’ margins in the red, but carrying through on grass would provide a return.
With the value of each kilogram gained by far outstripping the cost of gain, finished lamb prices above 1050¢ make the trade look attractive. Hence current strong store pricing.
Figure 3 shows the gross margins on the trade outlined in Figure 2 over the past eleven years. Margins have been around or over $100 per head for six of the past seven years, with the outlier being 2021-22 when the ¢/kg buy price was 170¢ higher than the sell price.
Note that this trade calculation does not include, freight, treatments, or administrative costs and uses an assumed generic feed cost. These will differ between enterprises and should be assessed individually when considering any trade.
What does it mean?
Margins on trading lambs remain relatively attractive, especially if finishing on grass. Given the high price of store cattle, lambs might be the more attractive option with a quicker turnaround. There is a risk of lower lamb prices, with the main danger being the season cutting out quickly and a flush of lambs hitting the market.
Key Points
- Store lamb prices have bounced back at all-time highs for this time of year.
- Margins on lamb trading remain strong at this time, even with a decline in finished lamb prices.
- Buying lambs in spring and selling in January has proved to be a profitable enterprise in recent years in theory based on historical prices.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, Mecardo
