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Mecardo Analysis - Supply still strong, but a tightening looms

  • By: "Prime" Ag News
  • May 19, 2019

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By Matt Dalgleish | Source: MLA, Mecardo. 

Yarding figures remain elevated for lamb and sheep despite a recent downturn. Lamb slaughter levels are above average too, while sheep slaughter has returned to levels consistent with the five-year average seasonal trend. Perhaps it is a good omen for producers as we approach Winter that prices continue to firm in the face of strong supply.

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As reported in last week’s market comment higher prices for lamb and sheep have failed to encourage more throughput at the sale yard with east coast levels for both categories posting a fall from the week prior – Figure 1.

Average weekly east coast lamb yarding levels for May have been running 20% above the five-year average and sheep yarding levels during May have been trending 35% higher than their long term seasonal average pattern indicating that demand for lamb and sheep remain robust as prices have been steadily moving higher.

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Indeed, at the Ballarat sale earlier in the week heavy export lambs set a Victorian record price of $300 per head, which equates to around 785¢/kg cwt. Higher prices have been replicated across the east coast with the Eastern States Trade Lamb Indicator (ESTLI) climbing 3% to close the week at 787¢/kg cwt. East coast mutton unable to hold ground this week, but only eased 4¢ to close at 557¢/kg cwt.

2019-05-17 Sheep 1 2019-05-17 Sheep 2

The week ahead
A glance at the five-year average seasonal trend for lamb/sheep yarding and slaughter show a clear decline in volumes as we head toward Winter, so a tightening of supply is looming.

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A weakening Australian dollar, down around 3.5% over the last month and trading below 70US¢, combined with robust offshore demand for Aussie lamb/sheep exports should continue to provide solid price support across ovine markets in the coming weeks.