Close shot of multiple sheep

Last week we took a look at the margins on feeding crossbred lambs, which raised a query from a reader. They are interested in trading Merino lambs, which have the added income of a fleece of wool but must be held for much longer to take advantage of this.

Merino lamb prices finished 2019 on a bit of a low. Figure 1 shows that the NSW Merino Lamb Indicator (MLI) followed mutton lower and closed the year at an eight month low.  In saleyards in NSW, Merino lambs were making around 650¢/kg cwt, which at a 40% dressing percentage equates to 260¢/kg lwt. 

It looks like Merino lambs might be a little more expensive now.  On Auctionsplus last week Merino lambs in the 30-35kg lwt range largely made 280-300¢/kg lwt, or $95-105per head.

We can see in figure 1 that Merino lamb prices follow trade lamb pretty closely, and as such, our Eastern States Trade Lamb Indicator (ESTLI) projections apply to Merinos, with a slight discount. 

The main difference between trading crossbred and Merino lambs is the timeframe.  Merino weight gains are usually slower, and spring lambs bought now are likely to have to wait until April for a 60mm, 2.5kg greasy fleece.

The wool price for autumn can be locked in, with 19 micron bids at 1750¢/kg clean for May at the moment. As such the wool value from Merino lambs can be locked in at $31.50.

In autumn it’s reasonable to expect that lamb prices will be stronger. We have put the weak price in at 700¢ and the strong price at 850¢. Merino lambs should be making 780¢ in late autumn.

To get the lambs to 20kgs cwt we are allowing 120kgs of feed at $420/t, so $50 per head.  The Margin after feed (Figure 2) looks pretty attractive, even at the weaker price of lambs, and it looks very good at a strong price. However, this margin takes no costs into account apart from feed, with shearing, labour, drench, vaccine and deaths not taken into consideration.

What does it mean?

Merino lambs are relatively unloved at the moment and look like pretty good value in terms of trading. While the trade will take longer and requires more labour than crossbred lambs, the returns from wool, and the higher selling price in ¢ per kilogram should offer plenty of compensation.

Have any questions or comments?

We love to hear from you!

Key Points

  • Merino lambs are looking cheap relative to crossbred lambs in the current market.
  • Merino lambs will be held for longer, but getting a cut of wool should compensate.
  • The longer time frame means ¢/kg values of lambs should be stronger.

Click on graph to expand

Click on graph to expand

Data sources: MLA, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

US lamb demand stronger

The US has held the mantle as our largest market for lamb exports since lambs got very expensive back in 2020. As a single destination,

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.