Mecardo Analysis - Rain on the parade of mutton
- By: "Farm Tender" News
- Ag Tech News
- Apr 02, 2019
- 527 views
- Share
By Angus Brown | Source: MLA, BOM.
This article is bought to you by Tuddenham Hay Contracting.
On Friday we noted the strong rise in mutton prices last week, with the assumption it was rainfall which caused the spike. Today we take a closer look at where the rain fell, and how the parade of sheep into works is likely to be halted in the short term. We’re definitely not going to see rain on the price parade.
We have seen very heavy sheep slaughter for the first three months of 2019, as dry weather has seen continued lightening of stocking rates. There was some rain about last week, with some autumn falls that might set some growers up for the winter.
Ad - We Cut, Rake and Bale - Serving the Wimmera, Mallee and Northern Vic areas. Tuddenham Hay Contracting - Ad
Ad - We Cut, Rake and Bale - Serving the Wimmera, Mallee and Northern Vic areas. Tuddenham Hay Contracting - Ad
With the rain, prices rallied strongly last week. Figure 1 shows the supply for slaughter of sheep has been steady in recent weeks, but at the time of writing slaughter for last week was not available.
Figure 2 shows last weeks’ rain, and if we combine this with Meat and Livestock Australia’s (MLA) sheep distribution map (here) we can see that a lot of sheep got wet.
There will be fewer sheep in NSW than when this map was produced in June 2017, but the number 1 sheep region of the Central West had its best rain in over a year. It was a similar story for the third largest sheep region of the Riverina, although only half of that region received the good rain.
A couple of smaller regions of NSW, which hold around another 7 million head of sheep, also had better than average March rainfall. The rainfall received last week, along with some earlier in March, should see some feed start to grow for 22% of the national flock, 27% of the east coast flock.
Ad - We Cut, Rake and Bale - Serving the Wimmera, Mallee and Northern Vic areas. Tuddenham Hay Contracting - Ad
Ad - We Cut, Rake and Bale - Serving the Wimmera, Mallee and Northern Vic areas. Tuddenham Hay Contracting - Ad
Another 20.5% of the east coast flock resides in areas which haven’t experienced drought to the extent of NSW. South west Victoria and south east SA and Tasmania have had dry summers, but last spring was ok.
While it will take a while to grow grass in NSW, we are now likely to see pressure to destock relieved for 40-50% of the east coast flock. The remainder of the flock is mostly in more marginal areas, and are likely to have been heavily destocked already.
Key points
* Mutton prices have rallied strongly in the last fortnight on the back of rain.
* Pressure to destock should have eased on 40-50% of the east coast flock.
* The recent price rally is similar to 2017 but should have more upside.
What does this mean?
It’s not just supply that pushes prices, demand will also be a factor. Livestock markets are subject to a unique situation where rainfall sees supply decrease and demand increase all at once. Some restocker demand was evident at saleyards last week, and if we get some follow up rains, it will only increase.
Ad - We Cut, Rake and Bale - Serving the Wimmera, Mallee and Northern Vic areas. Tuddenham Hay Contracting - Ad
Ad - We Cut, Rake and Bale - Serving the Wimmera, Mallee and Northern Vic areas. Tuddenham Hay Contracting - Ad
The last time we saw destocking followed by restocking was, albeit to a lesser degree, in 2017. Figure 3 shows what happened to mutton prices then. Prices trends are repeating, but we are set for stronger prices this time.
Share Ag News Via