Mecardo Analysis - NSW lambs not coming to the fore
- By: "Farm Tender" News
- Ag Tech News
- May 16, 2019
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By Angus Brown | Source: MLA, Mecardo
Lamb markets have been moving higher, but not in all states. For some time we have been talking about the lack of lambs in NSW and it seems to be coming to the fore. History tells us the other states are going to catch up shortly.
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NSW usually provides a large proportion of the lambs sold in saleyards through most of the year, with Victoria taking over in November and December. Figure 1 shows that while February and March saw yardings at similar levels to last year, yardings during the short weeks and in the last two have been well behind year earlier.
Lamb yardings have been curiously higher than the five year average. This is likely due to the stronger supply of light lambs, more suitable for restockers, and less likely to go direct to works.
NSW and Victorian lamb markets generally track closely together. This is not unusual, as it is easy for lambs to cross the border if one market gets ahead of the other. At the end of last week, NSW Trade lambs had streaked ahead of their southern counterparts.
Figure 2 shows that over the last two weeks the NSW Trade Lamb Indicator gained 66¢ or 9% to 782¢/kg cwt. Meanwhile, the Victorian Trade Lamb Indicator has remained relatively steady at 730¢/kg cwt.
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When prices get out of whack, they generally converge within a couple of weeks. It doesn’t look like NSW lambs prices are going to fall, as Victorian prices have done some catching up this week. Average trade lambs prices at Bendigo and Ballarat this week were close to 800¢, so it looks like the gap might be closed by the end of the week.
We know lamb supply should tighten from here. Whether that shows up in saleyards in NSW depends on how many go direct to processors. Traditionally many producers like to sell lambs through yards in the winter. This is especially so when prices are running hot and ahead of most over the hooks quotes, as they are at the moment.
Where tighter supply was mostly shown last year, and will again this year, was in lamb slaughter. Already we have seen May slaughter rates running 4% behind last year (Figure 3) and it will be interesting to see if lamb supply falls off a cliff like 2018, or if it eases more steadily.
Key points
* Lamb supply in NSW saleyards has tightened and prices moved ahead of other markets.
* This week has seen Victorian lamb prices catch those in NSW.
* Lamb supply is tighter but not markedly so, which suggests further upside is to come.
What does this mean?
With fewer lambs being sent direct to works, buyers rely more on the saleyards. With saleyard supply also tighter, we see prices rally strongly. The market adage of the higher prices being the cure for high prices doesn’t tend to apply in the current situation. There is simply no more supply for sellers to market, even if they wanted to.
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Anecdotal evidence suggests NSW lamb supply could be even tighter this year compared to last. It is from June to August when early lambs out of NSW prop up lamb supply, and this will coincide with the price peak. With prices approaching 800¢ and with supply still above the five year average, we could certainly see the peaks of last year surpassed.
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