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Wednesday, March 05, 2014

WA lamb markets move down the ladder - monthly percentiles

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

Key points

  • WA lamb markets have plateaued in recent weeks while eastern markets continue to rally.
  • Lamb prices in WA quoted around their 80-85th percentile levels. Heavier lines are attracting virtually no premiums to light lambs.
  • WA markets should catch up with the eastern prices in the short to medium term, as supply is still strong. 

After a strong price rally in December, most WA lamb categories plateaued in early January to see eastern states markets taking the lead. Nevertheless, most WA lamb types remain around their 80th to 85th percentile. Mutton is a touch behind, at 69th, but in line with the east.

Although lamb markets started the year on a very positive note in WA, some of that momentum was lost in recent weeks. At the start of the year, the WA trade lamb indicator was quoted at 480¢/kg cwt and at a 79¢, or 20%, premium to the eastern states benchmark, the Eastern States Trade Lamb Indicator (ESTLI). Right now, that situation has reversed completely to see the WA trade lamb price moving to a 72¢, or 13%, discount to the ESTLI.

In contrast to the east coast, the price gap between light and heavy lamb is minimal at this stage. While in the east that price differential is around 80¢, in WA it’s restricted to 10-15¢/kg cwt. As such, all finished cross-bred lamb indicators are quoted at very similar percentile levels; only ranging from the 80th to 84th rank.

As with lambs, the WA mutton indicator has moved sideways over the last five weeks and is now quoted at 230¢/kg cwt (69th percentile).

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?

While WA markets were the first ones to recover after bottoming in spring, eastern states markets have clearly outperformed the west in recent weeks. That has seen WA’s lamb prices moving from a sizeable premium to a sizeable discount to the east.

The small gap between light and heavy lamb prices in WA suggests that supply is more evenly spread across different weights in WA. This may be partly explained by access to cheaper feed and lower grain prices compared to the east.

The good news is that lamb supply should tighten in the coming months to see WA prices moving towards eastern levels. This should see WA lamb markets moving at least 60¢/kg cwt higher, to their 90th percentile levels, between now and winter.

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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