Mecardo Analysis - Merino’s golden fleece supports spreads
- By: "Farm Tender" News
- Ag Tech News
- Feb 05, 2019
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By Matt Dalgleish | Source: MLA, NLRS, Mecardo.
Merino lamb sale yard prices have begun the 2019 year in good shape compared with the Eastern States Trade Lamb Indicator (ESTLI) level, placing the Merino lamb spread to the ESTLI within most states well above normal levels that could be expected for this time in the season. However, Merino lamb categories aren’t the only types doing well – this analysis piece provides a snapshot of the sale yard spreads to the ESTLI across a range of lamb types as January comes to an end.
Based off the closing sale yard prices for January, Figure 1 outlines where Restocker and Merino Lamb spread across the states sit in relation to the ESTLI. The orange dash highlights the current spread to the ESTLI, while the range midpoint shows where the spread has averaged for this time in the season over the last ten years (black dash).
Included in the image is the normal range in the spread that could be expected, as demonstrated by the green band - which shows where the spread has fluctuated 70% of the time at this period in the season over the last decade.
NSW and Victorian Restocker Lambs aren’t far from their average seasonal levels but Restocker Lamb spreads in SA and WA are performing nearer to the higher end of their normal range. Merino Lamb spread across all reported states are sitting well above their normal seasonal range, probably reflective of the confidence going around the wool market presently.
Trade Lamb spreads in all states, except for Tasmania, are above or at the top end of the normal range. A similar picture appears for Heavy Lamb with NSW the only state to have the spread sitting close to the average seasonal level, while the remaining state’s Heavy Lamb spreads are all above the normal range – Figure 2.
A summary of the gap between the current spread to the average seasonal level is outlined in Figure 3 and it highlights just how strongly Merino categories are performing so far this season compared to other lamb types.
Key points
* Analysis of sale yard spreads to the ESTLI for a range of lamb types show that Merino categories are outperforming other lamb types.
* WA lamb spreads are all outperforming their respective lamb types from the other states.
* WA Merino Lamb is the star performer so far in 2019 with the current spread sitting more than 20% higher than would be expected for this time in the year.
What does this mean?
Wool prices have started the 2019 relatively firmly with the Eastern Market Indicator (EMI) climbing nearly 4% from the closing level in 2018. Growers appear self-assured that tight supply will continue to see wool prices supported this season and the confidence the wool market’s prospects gives producers looks to be filtering through into the sale yard price behaviour of Merino Lambs across all states.
Curiously, a glance at WA spreads for all categories shows that as a state WA is outperforming the other states, for each respective lamb type. Last season’s turmoil to the live sheep export trade saw WA lamb spreads nosedive from April to September, recovering only once the trade resumed. Perhaps the benefits of a reactivated live sheep trade have continued to support WA lamb spreads as we head into 2019.
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