Mecardo Analysis - Testing times ahead for WA producers
- By: "Farm Tender" News
- Ag Tech News
- Mar 19, 2019
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By Matt Dalgleish | Source: MLA, DAWR, Mecardo.
This article is bought to you by C Pearce Contracting.
This article is bought to you by C Pearce Contracting.
Last Friday the Department of Agriculture and Water Resources (DAWR) issued a statement on the proposed conditions for the forthcoming live sheep export trade over the Northern hemisphere summer. The live sheep trade is a crucial component of the WA sheep industry, underpinning lamb and sheep prices for producers within this state. Hopefully, the proposal to prohibit the trade over the June to August period won’t have the same price impact as last season.
Read more on the DAWR statement here
Since the resumption of the live sheep trade, the behaviour of price spreads between the West and the Eastern States Trade Lamb Indicator (ESTLI) shows that across all categories of lamb and sheep, WA stock has been outperforming their respective counterparts from the Eastern States.
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Currently, the WA Restocker Lamb spread to the ESTLI sits more than 10% above where they normally would at this time of the season and the pattern is repeated across all lamb types. WA Merino Lamb spreads are over 20% higher, WA Trade and Heavy Lamb spreads are more than 15% higher and WA Mutton spreads are more than 50% above what could be expected (Figure 1).
Last season Mecardo published a handful of analysis pieces showing how the spread pattern for WA lamb and sheep deteriorated significantly as the live sheep trade was halted, with WA producers missing out of the huge price gains enjoyed by their Eastern state’s counterparts over Winter 2018.
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Figures 2 and 3 demonstrate for WA Trade Lamb and WA Mutton how the spread improved again as soon as the live sheep trade resumed. During the first quarter of 2019 WA lamb and mutton spreads have been outperforming, in a similar manner to last year, and trending along the upper boundary of what could be considered normal as climatic factors have been relatively favourable to WA producers compared to the Eastern states.
Read more on how the resumption of the live sheep trade improved price conditions for WA farmers in these three articles from last year:
Key points
* WA lamb and sheep price spreads to the ESTLI have been performing better than could be expected for much of the first quarter of 2019.
* WA price spreads improved significantly once the live sheep trade resumed late in the 2018 season.
* A proposal to ban live sheep exports during the Northern hemisphere summer may see spreads deteriorate again for WA producers during the June to August period this season.
What does this mean?
The concern as we head toward the Northern hemisphere summer is whether the proposal to ban the trade for any ships that would “travel through waters in the Arabian Sea north of latitude 11°N at any time during the voyage” will have a negative impact on WA prices again this season. There is a clear connection, demonstrating that the live sheep trade provides a benefit to WA sheep and lamb prices.
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