By Matt Dalgleish | Source: MLA's NLRS, ACA
As we countdown to the end of 2015, it seems a good a time as any to assess how Mecardo’s forecasts compared to the market moves, and review the season for sheep and lamb. Regular readers of Mecardo would be aware of the strong bullish view we held on the Eastern States Trade Lamb Indicator (ESTLI) earlier in the year – so let’s investigate how we went.
February coincided with the release of a couple of optimistic articles pointing to an expected surge in lamb prices toward the 700¢ level. In the analysis “Can lambs go over $7?”, we estimated that current prices were near the lows and expected a move higher on the back of a lower A$ and reduced lamb production figures from MLA. An anticipated narrowing to the mutton indicator discount to ESTLI was also predicted with the mutton market expected to outperform lamb in 2015, although this failed to materialise as a decline in mutton exports to China kept demand lower than anticipated (figure 2).
Figure 1 shows that the market did indeed bottom out. However, our forecast high of 700¢ proved to be somewhat enthusiastic and in the March analysis we reassessed the state of the lamb markets. Although still backing a bullish view for lamb we revised our forecast of the ESTLI to reach 650¢ as an ongoing strong turnoff and a supply glut in export markets dampened our earlier predictions.
April saw a further downward revision to the ESTLI forecast, projecting a test of the 600¢ level in the short term and a potential peak of 625-650¢ in June/July. As the autumn lambing season was underway we turned our focus to the expected range in price following the spring supply flush.
Angus’s April article forecast a range of 460-530¢ for ESTLI in the spring of 2015, which was followed up with supply analysis in July predicting a spring low of 478¢ (Figure 3). As the season progressed and market conditions became more evident, our forecast became more accurate. The actual low came in at 468¢/kg cwt and the spring range of 470-525¢ was comfortably within predicted levels.
Augusto rounded out the analysis in late August predicting a mild downturn for the ESTLI and pointing to initial support levels in the 510-525¢ range. Figure 3 shows that this proved correct. This article also concluded that the ESTLI in 2015 would likely remain higher than levels seen in the 2014 season, which it did (figure 3).
Interested in how we went with our cattle market forecasts?
Read our article A perspective on the year of the bull run
Generally, the accuracy of Mecardo’s sheepmeat market outlook improved as the year progressed and trends in supply and demand emerged. The accuracy of market forecasting will always be challenged by expected shifts in market fundamentals. This is precisely why Mecardo regularly reviews and updates its market outlook. The main thing to remember is that a forecasting method based on reliable data and sound analysis – such as that employed by Mecardo - should provide a better than average prediction in the long run.
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