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Tuesday, August 25, 2015

Mutton still a good buy, while Merino lambs proving dear

By Angus Brown  |  Source: MLA's NLRS

Key points

  • Lamb markets are generally expensive for this time of year, but there are some sheep and lamb categories that are expensive and some that are cheap.
  • Mutton is still relatively cheap in all states, while Merino lambs are expensive in Victoria and NSW.
  • Buying sheep and selling Merino lambs is likely to be a profitable trade as markets correct through the spring.

2015-08-25 Lamb Basis FIG 1

2015-08-25 Lamb Basis FIG 2

Lamb and sheep prices have started their seasonal easing. In some areas that are receiving good rain, this may open up trading opportunities as I write. Here we take our regular look at price spreads in sheep and lamb markets, and see what is cheap and what is expensive.

The Eastern States Trade Lamb Indicator (ESTLI) has eased over the last fortnight, but remains historically strong for this time of year.  There are some sheep categories that are relatively cheap, and make good buying.

Table 1 shows how various lamb indicators are currently priced relative to the ESTLI and the historical range for this week.  Mutton remains at a larger than normal discount to ESTLI, as it has since May (figure 1). WA, Tasmania and SA show the largest discount, with sheep currently trading around 300¢/kg cwt.

Restocker lambs are largely around their normal discount to the ESTLI. The exception to this is South Australia, where prices this week were up 70¢, and up 148¢/kg cwt in two weeks, resulting in a higher than expected premium to the ESTLI.

Merino lambs are priced well relative to historical discounts to the ESTLI, with all states except WA at better than average price level.  Relatively strong Merino lamb prices may be an early indication of restocking intentions, as Merino lambs are one of the categories that might be held, or bought, when feed supplies are good.

Merino lambs in WA are cheaper than in Victoria and NSW, but are close to the average discount, and expensive relative to WA trade lambs.

What does this mean?

Despite lamb markets being relatively expensive, there is opportunity for traders to buy sheep to use excess grass.  Merino lambs are expensive, and good selling for those concerned about carrying stock through an El Nino spring and summer.  If the spring turns out to be a good one, Merino lambs are unlikely to be more expensive until the New Year.

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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