We recently received a request to look at the differences in lamb and sheep prices between eastern and western Australia. The question was specifically in terms of looking at over-the-hook prices. Without a reliable series of over-the-hook values, we are stuck with saleyards, but can make the comparison, nonetheless.
Reporting of over-the-hooks pricing remains limited at best. The Meat and Livestock Australia (MLA) sheep and lamb indicators are a national average and are reported monthly. For those looking for regional weekly pricing, saleyards indicators are still the best source.
WA lamb and sheep prices generally trade at a discount to east coast values. At best, WA lambs hit parity with the east coast. There is a limit to how much of a discount WA lambs can move to, and it’s the cost of freight to the east coast.
In the past we’ve seen convoys of road trains head east when dry weather sees the spread move past the cost of freight, making it a viable trade for east coast buyers.
Figure 1 shows the Eastern States Trade Lamb Indicator (ESTLI) and the Western Australian Trade Lamb Indicator (WATLI). The relatively small WA market means there is more volatility, with rapid price movements as the supply fluctuates.
After enjoying prices above 700¢ through December and January, WA producers were hit with an all too familiar rapid price decline. In the second week of February, the WATLI fell over 100¢/kg cwt and has stayed around the 600¢ mark since. The spread to the east coast for a 22kg cwt lamb is now close to $40, which has been about the limit of the discount in recent years.
We should keep in mind that in recent weeks there have only been 600-1000 lambs fitting the trade lamb description. It is a very small sample compared to the 45,000-55,000 lambs going over the hooks each week in the west.
On the sheep front, WA prices also trade at a discount to the east coast (Figure 2) but tend to follow prices more closely. Sheep are more easily traded for restocking purposes, and the live trade puts a floor under the market over the summer. Historically, there are usually more sheep included in WA indicators, making the pricing less volatile and more reliable than they are currently.
What does it mean?
WA sheep and lamb producers have long endured discounts to east coast pricing, and the recent flock liquidation obviously hasn’t helped. Change could be on the horizon, with a smaller WA flock restricting supply, but it obviously depends on how processing capacity adjusts.
Key Points
- WA lamb and mutton usually trade at a discount to East Coast values.
- The freight cost to the East Coast puts a floor in the WA price discount.
- Tightening supply could see WA price discounts shrink.
Click on graph to expand
Click on graph to expand
Data sources: MLA, Mecardo
