By Angus Brown | Source: MLA's NLRS, ABS
August lamb slaughter has continued the trend of the last 18 months, being considerably higher than last year and well above the five year average. The $164 question for lamb producers is whether the strong late winter supply is old season carry over, or new season lambs, which will detract from supply down the track. The answer is positive, and could well see the $164 answer and more.
Figure 1 shows ABS-reported east coast lamb slaughter for the year to date, with estimates for July and August based on the NLRS weekly slaughter data. July lamb slaughter is expected to be up 3% on 2013, and August up 11%. Data specifying the split between new season and old season lambs is unavailable. However, we can look at saleyard yarding data to get an idea of what sort of lambs are being sold.
Figure 2 shows East Coast new season lamb yardings for the year so far, with the 2014 curve tracking about 3 weeks ahead of 2013 and at a similar rate to 2012. Since the start of August there have been 72,000 more new season lambs yarded. While this doesn’t sound like many relative to weekly slaughter of 350,000, new season lamb yardings have been 40% higher than in August 2013.
Meanwhile, old season lamb supply at saleyards has been lower, down 25% on 2013. This is because more lambs were offloaded during the high price periods in autumn and early winter. Last week, new season lambs made up the majority of lambs in east coast saleyards for the first time since January, comprising 59% of yardings. Again, this is three weeks earlier than last year and 2012.
While the relationship between slaughter and yardings is sometimes a little variable, it is a pretty safe assumption that the extra 11% of lambs killed in August, and possibly more, was made up of new season lambs. This simply means these lambs will not be there to kill later in the spring or summer.
This analysis was designed as a precursor to our usual supply analysis, which looks at expected total lamb July to June supply minus those slaughtered to date, giving us an idea of what is to come. The fact that new season lambs are running early and old season lambs are largely finished means we can have some confidence that higher August slaughter is, in fact, literally eating into the 2014-15 lamb supply.
While there could be further price falls over the coming one to two months, downside seems limited given the continued strong demand, and the recovery should be strong when supply does start to wane in the New Year.
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