Market pushes sheep and wool prices

The wool market has held steady and moved slowly upwards over the past two years while the sheep and lamb markets have followed a similar trend.

As a result producers are showing they have plenty of confidence in the industry by not only growing their flocks but also improving their infrastructures.

Meat & Livestock Australia (MLA) reported in its April 2017 sheep industry projections update that results from the February 2017 MLA and Australian Wool Innovation (AWI) wool and sheepmeat survey showed there was a strong intention for Australian producers to maintain or increase the size of their breeding ewe flock over the next 12 months.

In fact, the proportion of respondents in the survey indicating they intended to maintain or increase ewe numbers was the highest it has been over the past five years.

The survey results indicated that there was an increasing intent among producers to lift ewe numbers by retaining older ewes and retaining more replacements – while the intent to purchase more had eased since the previous survey, which is not surprising given the current market dynamics which have created a more enticing time than ever to retain stock.

According to the Department of Agriculture and Food WA in 2016 there were 13.8 million sheep and lambs in WA being run by 5000 sheep producers with about 80 per cent of these producers managing a flock of more than 500 sheep.

The sheep and wool industry is a vital industry to the WA economy contributing almost half of the gross value of agricultural production from all livestock industries in WA.

This is made up of $661 million for wool and $513m for sheepmeat (including live exports) in 2015/16.

The department reports in 2015/16, some 4.1m sheep and lambs, over two thirds of the turn-off for the year, were processed producing 91,000 tonnes of sheepmeat and 72pc of this sheepmeat, with a value of $314m, was exported to markets in 50 countries.

The five largest destinations by volume for WA sheepmeat in this period were China (18pc), United Arab Emirates (10pc), Saudi Arabia (8pc), Jordan (8pc), and Qatar (7pc).

A further 1.7m sheep with a value of A$200m, were exported live to 12 countries, mostly in the Middle East.

When it comes to wool production WA produced about 65.2m kilograms of greasy wool in 2015/16 and more than 95pc of the wool produced was fine Merino wool measuring less than 24.5 micron, suitable for the apparel market.

Fine wool, with a fibre diameter under 19.6 micron, made up 50pc of the clip.

During 2015/16 about 82pc of the wool exports went to China with India (9pc) and the Czech Republic (4pc) the next largest destinations for WA wool.

With both wool and sheep prices in record territory producers returns have never looked better and as a result the sheep producer’s bank account is ticking over.

This month MLA reported the financial performance of Australian lamb producing farms for the 2016-17 year had been exceptional.

The average farm cash incomes of Australian lamb producers over this period, was the highest it had been in more than 20 years, in real terms.

The annual ABARES Australian Agricultural and Grazing Industries Survey estimates the 2016-17 average income of lamb producing farms at $265,000 per farm – an increase of 25 per cent from the previous year.

In 2016-17 the average income has climbed considerably higher (72pc) than the previous 15-year average (2000-01 to 2015-16).

The projected rise in incomes is due to higher prices for lambs, sheep and wool in 2016-17, as well as increased receipts from crops.

This is despite reduced lamb sales over the same period, as improved seasonal conditions in many key supply regions has encouraged flock rebuilding.

So where are the markets sitting and how do they compare to years gone by.

In the weekly Katanning and Muchea Livestock Centre sales, all classes of sheep have lifted significantly in recent months and are now well up on last year.

The mutton and lamb markets have both experienced solid rises since the beginning of the year.

In last week’s Meat and Livestock Australia’s (MLA) weekly WA sheep indicator report the saleyard indicator for mutton was 417c/kg, which is up 114c/kg (38 per cent) on the same week last year, while the over-the-hooks indicator had mutton at 460c/kg, which is up 187c/kg or 68pc on last year.

In dollar per head terms last week, mutton averaged $101.10 in the yards compared to $70.80 last year, which represents an increase of $30.30 or 43pc.

Lamb prices are also up significantly on the same time as last year.

The MLA WA saleyard sheep indicator report for last week had Merino lambs at 631c/kg, which is up 170c/kg (37pc) on last year, light lamb was quoted at 659c/kg, up 180c/kg (38pc), trade lamb was sitting at 657c/kg, up 145c/kg (28pc), while heavy lamb was recorded at 632c/kg, up 138c/kg (28pc).

In dollar per head terms Merino lambs were averaging $134.10, lightweights $113.20, trade weights $139.50 and heavyweights $155.60, which were up $47.80, $29.50, $33.50 and $31.10 respectively.

Since the last week in January all the lamb indicators have risen significantly the Merino lamb is up 162c/kg, light lamb is up 81c/kg, trade weight is up 121c/kg and heavyweight is up 120c/kg.

Along with the strong weekly sheep markets at Katanning and the Muchea Livestock Centre since the start of the year there has also been a new benchmark set for the price of breeding ewes in WA following record breaking sales in the Great Southern at the end of March.

In the two sales held at Gnowangerup and Kojonup prices sky-rocketed, hitting a high of $221 for March shorn, Merino ewes scanned in lamb multiple to Suffolk rams to set what is believed to be a State auction record price for commercial ewes.

All up in the two sales Elders offered and sold 8823 ewes and this included 909 head scanned dry, for an average of $184.50.

Of 28 lines offered across the two sales 12 were above the magical $200 mark.

The sales were just another illustration of how keen sheep producers are to purchase breeding ewes to increase flock numbers.

On the wool side of the equation the market has again performed strongly in the past 12 months and is breaking new ground.

At the start of the 2016/17 wool selling season in the first week of July last year the Western Market Indicator was sitting at 1423c/kg clean, making it the best start to a wool selling season in 11 years.

Since then the indicator has continued climb throughout the season and now sits at 1520c/kg after peaking at 1556c/kg in the middle of March.

Based on the current prices last week, the Australian Wool Exchange (AWEX) quoted a 185kg bale of 17.5 micron wool was worth $2638.

The same AWEX report quoted a 19 micron bale was worth $2228, a 21 micron was at $1758 and a 23 micron bale sat at $1593.