Mecardo Analysis - Restocker lambs expensive in north and cheap in the south

By: "Farm Tender" News
Ag Tech News
Jul 23, 2019
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This article is bought to you by Wallaloo Park.

By Angus Brown | Source: MLA.

In last week’s Friday commentary we talked about tanking restocker prices, and this saw us receive a query. Our reader wanted to know if falling restocker values, relative to finished lamb prices, are normal at this time of year, or if there is an opportunity going begging.

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Just as we were talking about restocker lamb prices falling, and being relatively cheap, in NSW they bounced back this week. In Victoria, they remain relatively cheap however, and there is likely good reason for the spread.

Figure 1 shows the Eastern States Trade Lamb Indicator (ESTLI) along with the NSW restocker lamb indicator and the Victorian restocker lamb indicator. The spreads have widened significantly since June with both the NSW and Victorian restocker indicators at more than a 150¢ discount to the ESTLI in the middle of last week.

The last few days have seen significant recovery in the NSW restocker indicator. Restocker lambs in NSW have bounced back, and gone past the previous high to set a new record high of 995¢ on Monday. The Victorian restocker indicator has tanked, falling to a two and half month low of 725¢/kg cwt.

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The 270¢ difference between NSW and Victoria equates to around a $40 spread on 35kg lwt lambs. The spread in prices is due to the age of lambs on offer in saleyards. In NSW autumn lambs are starting to hit the market, and they will still be lambs for another nine months yet.

In Victoria, most of the lambs in saleyards are left over from last spring. They might become hoggets by the time they gain enough weight to sell as finished lambs.

The rise in NSW restocker lambs was counter seasonal, the premium to the ESTLI is not unprecedented (figure 2). There is plenty of volatility, depending on what sort of lambs make up the restocker indicator for that week, but the NSW restocker spread was also positive in 2011 and 2017.

2019-07-23 Sheep 1

Figure 3 shows the Victorian restocker indicator is also not out of the realms of recent results, but it is at the bottom of the range. Restocker lambs in Victoria don’t usually bottom out, relative to the ESTLI, until August, but it’s not unusual to see them at a 20% discount at this time of year.

2019-07-23 Sheep 3

Key points

* Restocker lamb prices have hit new records in NSW, but have fallen heavily in Victoria.

* NSW lambs are likely to be autumn lambs, and have more time to be profitable.

* The premium in NSW and discount in Victoria are not records, but at the limit of the range.

What does this mean?

At the moment, restocker lambs in NSW are good selling. They are likely to be light, but on a cents per kilo basis, they have never been better selling. Timing the sales of these expensive store lambs will be important, as margins might feel a squeeze if they are held into late September.

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In Victoria, restocker lambs are not making good money. Given the outlook for finished lambs to remain strong for another month or six weeks, it is likely to be worth the while of putting another 10kgs on lambs to get into trade grids.

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