Mecardo Analysis - Will 830¢ be enough in July?
- By: "Farm Tender" News
- Ag Tech News
- May 01, 2019
- 442 views
- Share
By Angus Brown | Source: MLA.
This article is bought to you by Morgans.
There has been plenty of commentary around winter lamb supplies and how the expected dearth will see prices rally. With the season panning out in a similar fashion to last year, the best forward price we have seen of 830¢ was released by Coles last week for July. No doubt it is a good price, but the question being asked is whether it will be high enough.
Ad - Give Morgans a call for all your bulk Haulage, Grain Marketing and 24 hour Fuel access in Central Victoria - Ad
Ad - Give Morgans a call for all your bulk Haulage, Grain Marketing and 24 hour Fuel access in Central Victoria - Ad
Given the dry season and the decline of the sheep flock, processors have had a pretty good run to date with lamb supply. From November to May the supply of lambs for slaughter has been close to or higher than the five year average and similar to last year (Figure 1).
Obviously the dry summer and autumn have helped lamb supply remain strong. Plenty of ewe lambs and Merino lambs which might have survived to join the flock had it rained earlier are what have propped up supplies of terminal lambs, which were always headed to slaughter.
The forward price put out by Coles last week is no doubt designed to shore up supply, at what could be considered a fair price. Everyone remembers the lamb market breaching 800¢ last year, but as always the recall for the timing is not as accurate.
Ad - Give Morgans a call for all your bulk Haulage, Grain Marketing and 24 hour Fuel access in Central Victoria - Ad
Ad - Give Morgans a call for all your bulk Haulage, Grain Marketing and 24 hour Fuel access in Central Victoria - Ad
Figure 1 shows that lamb supply was actually still ok in July. In fact, in July 2017 lamb slaughter was 4% above the five year average, so supply wasn’t that tight. As supply wasn’t that tight, neither were prices ‘that’ high. Last July the Eastern States Trade Lamb Indicator (ESTLI) was at a record high, starting at 714¢ and rising to 798¢/kg cwt, but it was not at the levels offered for the coming July (Figure 2).
It was August and September in 2018 which saw lamb price north of 800¢ as the early lambs out of NSW failed to appear and the late southern lambs dried up. This year we are likely to see a similar trend, but the supply dearth could last longer and take in July as well.
Ad - Give Morgans a call for all your bulk Haulage, Grain Marketing and 24 hour Fuel access in Central Victoria - Ad
Ad - Give Morgans a call for all your bulk Haulage, Grain Marketing and 24 hour Fuel access in Central Victoria - Ad
Key points
* Lamb Forward contracts for July have been released at 830¢/kg cwt.
* Forward prices are stronger than last July, but weaker than record levels from August 2018.
* Lamb prices are likely to be higher than 830¢ at some stage, but it may not be in July.
What does this mean?
Simply looking at last year’s prices, the 830¢/kg cwt on offer for July looks very attractive. It’s higher than last year at the same time and just 6% off the record saleyard value set in August last year.
However, taking expected tight supplies, and what looks like stronger demand from export markets into account, it’s likely that lamb prices will be higher than 830¢ at some stage. Whether that is in July remains to be seen, so those considering booking lambs in need to consider whether they will be able to hold if prices are not where they would like them to be.
Share Ag News Via