Prices ease amidst short supply

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Author: Matt Dalgleish

Despite being within the midst of tight winter supply prices declined this week across most national indicator categories. The benchmark Eastern States Trade Lamb Indicator (ESTLI) mirrored the fortunes of the national sale yard prices dropping 1.7% to close yesterday at 926¢/kg cwt.

The ESTLI has had a couple of attempts to break above 950¢ in recent weeks but has been meeting stiff resistance at this level for the moment. Producers will be conscious that the spring flush is just around the corner. Last season the ESTLI peaked in late August and declined 23% over the month of September. A similar magnitude drop this season would place the ESTLI at around 730¢/kg cwt.

East coast lamb weekly slaughter levels are heading toward 250,000 head and the average seasonal trend shows that slaughter levels usually begin to increase from the winter trough in late July. Signaling that increased supply for processors isn’t far away – Figure 1.

Another supply metric worth keeping an eye on is the Victorian lamb yarding levels as the bulk of the spring flush of lambs each season emanate from here. As the average seasonal pattern demonstrates the Victorian lamb supply usually doesn’t start to pick up steam until September – Figure 2.

Although last year we saw a bit of an early break due to the dry autumn/winter, conditions this year have been pretty good across most of Victorian sheep country so there maybe some incentive for producers to hold on to lambs to get a bit more weight on. The risk is of course that price declines wipe out the weight gains. In early July Mecardo looked at this in detail and it is worth a read if you missed the article on release.

Mecardo have been engaged by Livecorp to undertake an analysis of the benefits of the live sheep trade to regional Australia and there is currently a short survey for all members of the live sheep export supply chain to complete. If you have a moment and are involved in any manner in the live sheep trade, please take the time to complete it and/or let anyone you know that earns a living from the trade to access it too – this includes transport operators, fodder suppliers, shearers, vets, etc.

The week ahead

The national sale yard indicators have shown this week that prices can ease sharply, particularly Heavy Lamb that shaved off 25¢ this week (Figure 3), and bear in mind this is during tight winter supplies. It won’t take much to get prices moving south quicker once the spring flush hits in earnest.