While there have been some forward prices floating around for spring lambs in Victoria, the first late spring and summer prices were released last week. While there is some discount to current new season lamb prices, there has never been a better offer for lambs sold in summer.
Traditionally processors pitch forward prices at levels similar to last year, for that particular time. This year the extremely strong prices seen as we move into October might have forced a rethink in terms of securing supply.
Obviously, the continued good season also means producers have options in terms of timing of sales, so to get them to commit will take a pretty good price. Thomas Foods International (TFI) have pegged their Tamworth prices at very strong levels all the way from November to the end of February. The contracts have been filled, but it’s worth taking a look at the price levels.
Figure 1 shows the Eastern States Trade Lamb Indicator (ESTLI) for this financial year, compared to last year and the five-year average. The forwards start in early November at close to current prices of 940¢/kg cwt, and ease back to 900¢ for much of the summer.
The weight range for the contracts are 16-32kgs. For lambs 26kg plus which were discounted to trade lambs in the order of 50¢ last summer, the forward prices are at an even stronger premium. A 28kg lamb which went over the hooks last year at 780¢/kg cwt, or $218 per head can now be locked in at $252. This is a 15.5% increase on top of what was already a very good prices.
Historical prices have only been better than the forward in late February 2020, just before the pandemic hit.
For merino lambs the forward pricing is also very good. Figure 2 shows the forward for Merino lambs at a solid premium to current saleyard pricing, and around 130¢ above the price seen in summer 2020-21.
Last week we looked at the price of store merino wethers, with 850¢ being the best case sell price. Those in northern NSW can lock in a price better than this, which makes merino wether lambs look a good buy in the current extreme store market.
What does it mean?
Forward prices pitched at a premium to last year, and at what would be record prices for the time of year in December and January will give lamb producers, and traders, plenty of confidence as we move towards summer.
The fact the prices are so strong for heavy lambs also points to the resurgence of the export market. We have been talking about the strength in the US for a while now, and it looks like it is set to continue.
Key Points
- Very strong lamb forward contracts for summer have been released for northern NSW.
- Prices are pitched at a premium to last year, especially for heavy lambs and merinos.
- The store market will take confidence out of forward pricing.
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Data sources: MLA, TFI, Mecardo
