Market demands more prime lambs in dry
IINTENSIFYING poor conditions across many of Australia’s key sheep production areas have caused a significant upward revision of sheep slaughter forecasts for 2018 in Meat & Livestock Australia’s Sheep Industry Projections September update.
Annual lamb slaughter is now projected to be
22.9 million head for 2018, up 2 per cent on 2017, while sheep slaughter is forecast to reach 9.3 million head, up
23 per cent on 2017 levels. MLA’s market intelligence manager, Scott Tolmie, said it had been a year of extremes so far for the Australian lamb market, with prices soaring into uncharted territory as strong demand meets tightening supply.
“Australian lamb prices have been rising strongly since April, breaking records as they smashed through the
700c and 800c/kg carcase weight marks for the first time,” Mr Tolmie said.
“Poor seasonal conditions and high feed costs have led to a waning supply of finished lambs as the year has progressed.
“This, combined with strong international demand, has resulted in fierce competition for a diminishing supply and driven up prices across the board.”
Livestock agent George McVeigh from TopX in Warwick said he was concerned about the number of finished lambs coming through the yards.
“The really worrying fact is we’re not going to get prime lambs because we don’t have the feed,” he said.
“So the only way we’re going to get prime lambs is if people are going to grain-finish lambs – and of course the price of grain is very dear.
“So it’s going to be a juggling act between the price of grain and the price of finished lambs. You feed them grain to finish them but if they don’t get the end price, they’re not going to feed them grain.
“I’d say the premium price will be for the finished lambs.”
Mr Tolmie said the dry conditions drove increased lamb slaughter for the first half of the year.
“It spiked in the second quarter of 2018 as conditions worsened and producers looked to destock. This peaked in June with the highest month of lamb slaughter on record,” he said.
“Lamb slaughter has fallen in recent months due to the delay in new-season lambs entering the market.
“With no indication of improved seasonal conditions in the short term, reports suggest there will be greater numbers of light weight, unfinished new-season lambs coming onto the market this year, as many producers in drought-stricken NSW and northern Victoria face challenging feed conditions.
“The timing and quality of the new-season lamb crop will have a large impact on prices for the rest of 2018.”
Ross Ellis from McDougall and Sons in Warwick said the market was starting to flatten out as new-season lambs start to enter the market.
“It’s pretty tough going. A lot of people have been turning off the lambs they’d take through simply because of the season,” he said.
“The really high prices have been up there for the export-style lambs 35kg and upwards. We got to $296 a head for 80kg live weight last week.
“The prices are just coming off the boil a little. They’re still higher than normal but off those peaks we were getting a few weeks ago.
“We have Victorian producers which are starting to bring their spring lambs into the market now, which is starting to flatten it out a little. They bring their lambs through a bit earlier than us.”
Mr Tolmie said while strong lamb and mutton prices had been a motivating factor to maintain or build flock numbers, the lack of rain across much of Australia had put a lot of pressure on producers to destock or supplementary feed.
Looking at the export market, Mr Tolmie said strong global demand for Australian sheepmeat, combined with the softer Australian dollar and constrained domestic supplies out of New Zealand, had supported record export volumes and values.
“Lamb exports between January and August increased
12 per cent, to a record
183,000 tonnes shipped weight (swt), while mutton shipments surged 25 per cent, to 105,000 tonnes swt,” Mr Tolmie said.
Furthermore, the unit value of Australian lamb exports for the year to July reached new record highs at A$8/kg, and was mirrored in mutton which climbed to A$5.88/kg for the same period.
“These factors saw the value of Australian sheepmeat exports last financial year hit new heights, at A$3.29 billion. Nonetheless the domestic market remains the single most valuable for the industry, with Australians the world’s largest consumers of lamb on a per capita basis.”
JUGGLING ACT: Producers are weighing up their options on whether to grain feed lambs to get potentially higher prices at market.