What can go right or wrong for lamb?

What can go right or wrong for lamb?


Sheep
Figure one - Eastern States Trade Lamb Indicator: Early 2017 saw the opposite January trend to 2018. A jump higher followed the Christmas low, with higher prices maintained through the rest of the financial year.

Figure one - Eastern States Trade Lamb Indicator: Early 2017 saw the opposite January trend to 2018. A jump higher followed the Christmas low, with higher prices maintained through the rest of the financial year.

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Lamb markets have opened relatively steady writes Mecardo's Angus Brown

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LAMB markets have opened relatively steady and at similar levels to this time last year. In early 2018 however, the market was hitting a peak, while it is currently close to a financial year low. The general outlook is for stronger prices over coming months, but there are arguments for both upside and downside.

The five-year average seasonality for the Eastern States Trade Lamb Indicator (ESTLI) shows a lift in January. The market then steadies in autumn before rallying into the winter as supply tightens. Price trends don’t always follow the average, however.

Figure 1 shows that after a brief peak in January, lamb prices eased to a 14 month low in April last year. The winter rally came as per usual to the end of June before the market went crazy in August and September.

The trend towards the end of 2016 was similar to 2018, with the market finding a low at the end of the year.

It is hard to imagine the ESTLI is going to step higher like it did in early 2017. There have been some positive signs in saleyards this week, but supply is reportedly adequate for January, so we might have to wait a little longer for significant upside.

Figure 2 shows that our lamb is not historically expensive in export markets. If and when supply tightens there remains plenty of upside.

On the downside, the risks appear to be minimal from here. We’re unlikely to see supply overwhelming demand, given the suspected lack of lambs produced this year.

What does it mean?

The pricing on offer for over the hooks lambs at the moment, along with forward pricing for February, suggests that there is still some concern around supply as we move through summer.

Figure 2 Eastern States Trade Lamb Indicator US$: The weaker Australian dollar of recent times has pushed the ESTLI in US dollar terms to levels below this time last year and well below the record highs of 2011.

Figure 2 Eastern States Trade Lamb Indicator US$: The weaker Australian dollar of recent times has pushed the ESTLI in US dollar terms to levels below this time last year and well below the record highs of 2011.

There is potential for markets to step up to 800¢ at some stage, but as always it’s a question of when. Rain would obviously help.

Markets can go lower, but it would take a solid supply flush. This time of year that is unlikely and current fundamentals don’t suggest we’ll see lamb values much lower than current levels.

The story What can go right or wrong for lamb? first appeared on Farm Online.

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