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Wednesday, March 05, 2014

Percentile analysis shows – the heavier the better in Tasmania

By Augusto Semmelroth  |  Source: MLA's NLRS, ACU

Key points

  • Lamb markets continue to creep higher in Tasmania with all finished lamb categories now ranging between their 83rd and 97th percentile level.
  • Heavy lambs at a 59¢ premium to light lambs, and at their 97th percentile.
  • Mutton prices still lagging behind lambs in this rally, now at 250¢/kg cwt (77th percentile).

Lamb markets have posted a stellar recovery in the last few weeks in Tasmania. All finished lamb indicators are now between 484¢ and 543¢/kg cwt, which equates to the 83rd to 97th percentile levels for individual categories. As a general rule, the heavier, the better the price, in both absolute and percentile terms.

Tasmanian lamb prices have rallied over the last five weeks. At the lower end of the scale, light lambs have rebounded 21% to 484¢/kg cwt during the period, while heavy lambs have jumped 34% to hit 543¢/kg cwt last week.

This is similar to what has happened in the eastern states and SA, with lambs being turned off lighter to see increasing supplies and comparable lower prices. As a result, light lambs in Tasmania are still quoted 31¢ and 59¢ below trade and heavy lambs, respectively.

Another way of putting these numbers into perspective is to look at the percentile levels for each individual category. As of last week, TAS light lambs were still quoted at their 83rd percentile while trade and heavy lambs were at their 91st and 97th percentile level, respectively.

Mutton markets continue to lag behind lambs after this recent rally, but, at 250¢/kg cwt, are also approaching their 77th percentile level. 

Cattle prices collected from saleyards in Tasmania are patchy at best. As such, looking at percentile levels can be very tricky given the lack of weekly quotes coming from the island state.

With this caveat in mind, cows are probably the best category to perform a decent percentile analysis given the greater number of price quotes throughout the year. As of last week, the Tasmanian cow indicator was quoted at 199¢/kg cwt after falling 73¢, or 27%, from late January levels. This puts the average cow price at its 7th percentile level.

What are percentiles?

Percentiles (sometimes called deciles) provide one way of estimating what may happen in the future by looking at what has happened in the past. A percentile is a measure of how often, historically, prices have fallen above or below a particular price level. However, it is important to note that percentiles are not a definitive measure of absolute price ranges.  They are just one tool in your market information toolbox, and should be considered in conjunction with the other information you use.    Read more about how to interpret percentiles

What does this mean?

Although lamb prices are very high in historical terms, they seem to have more upside on the back of rising eastern states prices this week. That said, lighter categories are likely to have greater potential upside for now than heavier lambs.

Mutton prices have more room to move in comparison to lambs, especially if autumn conditions turn out to be around average or better. It’s quite possible that mutton prices may move up to the 85th percentile level (285¢/kg cwt) or higher if that scenario unfolds.

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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