How high can lamb prices go as indicator hits 900c?

More heat on winter lamb prices as indicator hits 900c

Analysis
GOLDEN GLOW: Reduced slaughter turn-off and strong international demand is continuing to put upward pressure on saleyard lamb prices.

GOLDEN GLOW: Reduced slaughter turn-off and strong international demand is continuing to put upward pressure on saleyard lamb prices.

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The key Eastern States Trade lamb indicator has hit a record 900c a kg as turn-off of prime lambs and sheep starts to slow down.

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With the benchmark Eastern States Trade Lamb indicator price hitting a record 900 cents a kg carcase weight, sheepmeat processors are preparing for a rough few weeks sourcing stock.

Meat & Livestock Australia said stock shortages were expected to support prices throughout July before they settle as new season lambs enter the market from August.

"The rate at which new season lambs enter the market will be pivotal. A repeat of last year, whereby a lag between old and new season lambs hitting the market pinched slaughter supply, would sustain support across all sheep and lamb categories well into spring," MLA said in a market update.

It said slaughter numbers had started to slow down in line with earlier predictions.

"Lamb slaughter numbers have been in contraction and were 13pc below year-ago levels last week," MLA said.

"Last year, drought and very high supplementary feed prices delayed the onset of finished young lambs and created a supply deficit, driving prices to a peak in September.

Drought conditions persist in many regions however the prevalence of supplementary feeding, given the strong returns, this season may support the timing of finished lambs.

"That said, the total number of lambs on the ground will be a limiting factor for supply due to a reduced flock and fewer ewes joined, as highlighted in the recent Sheep Industry Projections June update.

"Lamb supplies in New Zealand will continue to contract in the coming weeks, pressuring prices on the other side of the Tasman, too.

"NZ lamb prices are now following the same trajectory to last year, when record lamb returns were achieved in September.

"The Australian national trade lamb indicator (18-22kg cwt) started its rally much earlier than its NZ counterpart this year and, on a currency-adjusted basis, moved to a 21pc premium in June.

"AgriHQ have reported one large NZ processor is offering a fixed NZ900c/kg (equivalent to AUD859c/kg based on current exchange rates) contract to secure lamb supplies in August.

"Whether the overall market achieves this level will depend on the severity of the winter contraction however NZ lamb prices reaching record levels seems a realistic possibility.

"A limited pool of sheepmeat, particularly high quality, combined with growing demand in key markets, namely China and the US, has underpinned robust prices on both sides of the Tasman.

"Demand fundamentals remain strong despite record prices from key suppliers. Limited availability in the months ahead from the two leading global sheepmeat exporters will sustain pressure on lamb prices, certainly until new season lambs enter the market," MLA said.

The story How high can lamb prices go as indicator hits 900c? first appeared on Farm Online.

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