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Thursday, October 23, 2014

It’s counter intuitive, but fewer light lambs being yarded

By Angus Brown  |  Source: MLA's NLRS

Key points

  • Light lamb yardings have been lower than last year and the five year average since the start of July, contrary to some beliefs.
  • Weaker supply of light lambs has been compensated by stronger supply of heavy lambs.
  • Light lamb prices are well above last year, and are stronger relative to the ESTLI, which fits with lower supplies.
  • Dry weather in Victoria and SA could see light lamb supply lift in the coming month, creating opportunities for feeders and restockers.

2014-10-21 Fewer Light Lambs Yarded FIG 1

2014-10-21 Fewer Light Lambs Yarded FIG 2

2014-10-21 Fewer Light Lambs Yarded FIG 3

In response to a subscriber query on how the increased supply of light lambs might impact total lamb production and therefore lamb prices, this article looks at East Coast light lamb yardings. The results were a little unexpected, with light lamb yardings largely tracking lower than last year.

Data on lamb slaughter and slaughter weights is not readily available. While we can look at average slaughter weights using ABS slaughter and lamb production figures, this data is 6-8 weeks behind, with the latest data from August.  As such, we looked at lamb yardings at NLRS saleyards as a proxy for lamb slaughter, as it will at least tell us what sort of lambs are being offloaded into saleyards.

Figure 1 shows weekly light lamb (all lambs under 18kg cwt including Merinos) yardings in NSW, SA and Victorian NLRS-reported saleyards for this year, last year, 2012-13 and the five year average.  Since July, 508,664 head of lambs under 18kg have been yarded in east coast saleyards, 22% lower than last year and 4% lower than the five year average.

Total lamb yardings for east coast markets have been just 1% lower than last year since July, and 4% higher than the five year average. As such, light lambs have made up a smaller proportion of lambs yarded since July (figure 2), on average 24% of lambs yarded being light lambs, compared to 31% last year and the five year average of 26%.

While it’s hard to know if yarding weights correlate closely with slaughter weights in any given year, we can see from these numbers that in saleyards at least there hasn’t been a shift to selling lighter lambs. In fact, lambs are heavier this year than last year, which is likely due to good growing conditions from April to August through much of NSW where 64% of the lambs were yarded from July to October.

Light lamb yardings have risen sharply since mid-September, but are only back to a similar proportion of the yarding to last year. Much of this rise has come from Victoria and SA, where conditions are turning against producers in some major sheep production regions.

What does this mean?

Figure 3 shows the National Light Lamb Indicator, which is only 1st and 2nd Cross Lambs, not all the lambs as with the supply figures.  Light lamb prices are 18% higher than this time last year, at 432¢/kg cwt last week, and at a 30¢ discount to the ESTLI, which is smaller than the usual discount of 40¢ for this time of year.

Over the last three and a half months it’s likely we’ve been producing more lamb per head than last year, which makes the strength in the price even more indicative of strong demand.  However, over the coming month as supply focus shifts south, we may see more light lambs hit the market, as prices are relatively good. This could see the light lamb discount widen, creating opportunities for restockers or feeders. 

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 


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