Mecardo Analysis - A season spent at the edge of normal
- By: "Farm Tender" News
- Ag Tech News
- Oct 18, 2018
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By Matt Dalgleish | Source: MLA, Mecardo.
The 2018 season has seen the largest range in the Eastern States Trade Lamb Indicator (ESTLI) in over a decade recording a 313¢ movement from the 571¢ trough in April to the 884¢ peak in September. This article looks at the seasonal percentage gain/losses in the ESTLI and the National Mutton Indicator to identify just how abnormal price movements have been this year and what may be in store for the ESTLI as the spring flush gets underway.
The seasonal percentage gain/loss trend for the ESTLI during 2018 is shown in Figure 1 and includes the pattern set during 2017, the ten-year average trend and the “normal” range that could be anticipated in any given year, as identified by the shaded grey 70% zone.
Compared to the average seasonal trend, the ESTLI posted a rather uninspiring performance for the first half of 2018. It spent this period trekking below the lower boundary of the normal range as trade lamb values were weighed down by the drought situation. However, concern over the supply of suitably conditioned lambs into winter saw the ESTLI rally strongly. The ESTLI posted percentage gains over 30% higher than the seasons opening price during September, briefly breaching the upper end of the normal range before returning to the long-term average in October.
In contrast, the National Mutton Indicator (NMI) has spent much of the 2018 season languishing at/or slightly below the lower boundary of the normal range. Mutton prices declined 20% over the January to February period which set the tone for its rather muted performance. Although it’s worthwhile to note that since the end of February the NMI pattern for the rest of the 2018 season has mirrored the average seasonal trend, gaining ground from March through to a winter peak before easing into spring (Figure 2).
Increasing lamb throughput as we head toward summer is largely a Victorian phenomenon with average weekly volumes at the saleyard growing from around 30,000 head during September to peak near 150,000 head by the year’s end (Figure 3). The increasing lamb yarding often weighs on the ESTLI throughout October and November to see the market test seasonal lows, usually in late November/early December.
Key points
* The ESTLI has seen the largest range in price activity in over a decade, moving 313¢ from the 571¢ April low to the 884¢ September peak.
* East coast lamb throughput often stages a doubling in spring as swelling Victorian numbers hit the market.
* An ESTLI easing toward the 630-650¢ region isn’t out of the question as the spring flush gets underway in earnest.
What does this mean?
Since mid-June, the average weekly Victorian lamb throughput has been running 54% above the five-year trend and the big surge in numbers is still yet to materialise. It’s too early to tell if the extra Victorian lamb volumes seen over winter will mean there are less to hit the market during spring/summer. Further muddying the water is the possibility that some of the lambs sent to Victorian saleyards during winter may have crossed the border as drought refugees from NSW, meaning there are still good numbers of lambs to present themselves out of Victoria in the coming months.
Assuming a relatively average spring flush pattern of Victorian throughput to the end of the year, it’s fair to expect some easing of the ESTLI as we head toward the end of November. Considering the historic magnitude of price declines normally experienced during spring, we could expect the ESTLI to bottom out near the 630-650¢ region.
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