By Angus Brown | Source: MLA
The lamb market has been building for a few weeks now, and judging by early week market reports, it might make the jump to record levels this week. The supply pull back which has been expected for a while seems to have hit this week, but how long can it last?
Many lamb producers use the lunchtime market reports on the country hour as leading indicators for the lamb market. The Monday Bendigo report is particularly closely followed in Victoria for an idea of where the market is headed for the week. Today, lamb producers who still have old season, or those with early new season lambs got a good report.
The Bendigo market report was today quoted as ‘exceptional’, and figure 1 shows why. There were more lambs at Bendigo, so it wasn’t locally tighter supply driving the market. More likely it was a lack of lambs going over the hooks, and fewer early lambs out of NSW, which has driven the market higher.
Figure 1 shows the average price of 20-22kg lambs leaping 88¢ or nearly 14% to hit a new record of 735¢ on Monday. The market report claims almost all lambs sold made over 700¢ as buyers competing strongly for lambs.
Figure 1 also shows that the Bendigo saleyards are a pretty solid leading indicator for the Eastern States Trade Lamb Indicator (ESTLI). Where Bendigo goes early in the week, the ESTLI tends to follow. So don’t be surprised if the ESTLI finishes this week above 700¢ and at a new record high.
With the winter price peak about to hit the next question is how long will it last. Figure 2 shows that on average the ESTLI starts to ease in July, but loses ground more quickly from August to October. Last winter the ESTLI fell most heavily in July, but managed to maintain a strong price throughout the spring.
It’s hard to see lamb prices falling to far in July, with the supply of finished lambs unlikely to lift due to the dry weather in NSW, so we could see winter peaks last through until August. Even then price downside might be limited.
While rising lamb prices are good for producers, there are unlikely to be too many with lambs left to take advantage of the high prices. Normally the winter price rally encourages early lamb producers to get lambs out early. The lack of early lambs this year should sustain prices above 700¢ in the short term.
When lamb supply does improve, it’s hard to see it outstripping last year’s levels. This, coupled with continued strong demand, should continue the run of lamb prices better than 600¢ in the medium term.
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