Category: Sheep

“Spirited” bidding gives sellers an edge

The wool market is drawing close to the end of year recess and like many of us, exporters were spurred on to fill their orders to ensure they make shipping cutoffs. Demand kept slightly ahead of the increased supply, with most categories posting small increases on the week.

The Eastern Market Indicator (EMI) rose 11 cents for the week to close at 1,503 cents. The AU$ had another positive week, rising .05 cents to US $0.689. In US terms, this pushed the EMI up 14 cents to 1,035 cents.

The Western Market Indicator gained 10 cents for the week to finish at 1,614 cents. Mid micron fibres received most buyer interest, with prices 20 to 40 cents higher for the 20 and 21 MPGs. AWEX reported that all types and descriptions enjoyed the scramble for volumes.

The national offering was significantly higher this week with an extra 4,393 brought forward. The total offering was 42,542 bales. With the rising market, the pass in rate fell; back to 10.7%. This meant that 37,985 bales cleared to the trade. While this is the highest weekly volume of bales sold so far this season, it was still 4,544 bales fewer than the same week in 2018. The total lag in bale clearance from this season to last is currently at a difference of 107,825 bales.

The dollar value for the week was $61.89 million, with the average bale value sitting at $1,629, drifting 16 per bale below last week’s average. The combined value so far this season finally tipped over the billion-dollar mark to $1.007 billion.

The crossbred sector saw mixed results between selling centres. In Melbourne prices lifted by on average 20 cents while Sydney ranged from 15 cent losses to 7 cent gains for the 26 and 28 MPG respectively. The Merino Cardings Indicators defied the wider market again, but this time contracting, with losses of 15 to 20 cents.

The week ahead:

Next week is the last week of sale before the wool market breaks for Christmas recess. 39,430 bales are currently on the roster, with sale days on Tuesday and Wednesday across the three selling centres.

Sales will resume on the week of the 13th of January.

Ovine yardings reaching a peak

It is the time of year when lamb yardings reach their seasonal high, driven largely by Victoria.  It was Sheep that reached a record last week, however.  This is no surprise given the very good prices at a time of year when they usually hit their lows.

East coast sheep yardings reached a new record last week, but only just.  There were 139,490 head of sheep yarded last week (figure 1).  This was only 321 head more than five weeks ago, but it’s a number which hasn’t been seen in at least 12 years.

Strong sheep yardings are being somewhat offset by weaker than normal lamb yardings.  Figure 2 shows lamb yardings were 14% below the same week last year, but in reality, it depends a bit on how you match your weeks up.  It looks like lamb yardings might be a week behind last year, but we should know if we have seen ‘normal’ supply by the end of next week.

Trade and Heavy Lambs found a bit of strength this week, the Eastern States Trade Lamb Indicator (ESTLI) bouncing off 700¢ (figure 3).  The spread between NSW and Victoria still stands at around 40¢, while WA prices fell back under 700¢ after four consecutive weeks of rises.

The heavy mutton supply has seen buyers able to pull prices back slightly.  The east coast Mutton Indicator fell 13¢ to 568¢/kg cwt.  Opposite to lamb, mutton in NSW is cheaper than Victoria.  This is probably a quality issue.

Next Week:

With no rain on the forecast as we come into Christmas, expect some big yardings next week.  What it does to prices will depend on how many sheep and lambs are booked up for the workdays in the break, but recent contracts would suggest processors won’t be scrambling for supply.  The last week might this time see the lowest lamb price since April.

All downhill ‘til Christmas?

A strong offering had the typical effect on wool prices, the market sliding another step lower this week. Growers protested the downward trajectory in hordes with passed in rates hitting 20.4% to see a total of 7,765 bales returning to brokers’ stores.

The Eastern Market Indicator (EMI) lost 38 cents for the week to close at 1,492 cents. The AU$ opened strongly which played into the lack of buying enthusiasm. The AU$ rose 0.07 cents for the week to US $0.684. In US terms, this pushed the EMI down just 15 cents to 1,020 cents.

The Western Market Indicator experienced falls in line with the eastern markets. The WMI dropped 36 cents for the week to finish at 1,604 cents. AWEX reported that lesser style wools did not fare well in this week’s market. Buyers continually discounted their pricing levels and by the end of the series, had fallen 50 to 80 cents.

The national offering was 322 bales higher this week for a total of 38,149 bales. However, the high passed in rates meant the number of bales sold was down by over 2,000 on last week’s volumes. Just 30,384 bales were cleared to the trade for the week. This season’s bale clearance continues to lag well behind 2018 at a difference of 100,281 bales. The average weekly bales volume is currently 5,164 behind last year.

The dollar value for the week was $50 million flat, with the average bale value sitting at $1,645, drifting $19 per bale below last week’s average. The combined value so far this season is $945.47 million.

The crossbred sector fell across all microns, losing 20 to 45 cents. Oddments were the only category to record gains. The Merino Cardings Indicators rose by an average of 2 cents across the three selling centres.

Mutton slaughter rising, but prices steady

Sheep slaughter had its second highest week for the year as sheep continue to flow into markets.  There has been little impact on prices however, as with lamb, slaughter is down, there is still kill space to fill.

Chinese mutton demand continues to run hot.  Mutton slaughter was very high last week, yet the National Mutton Indicator remains at very strong levels, at 572¢/kg cwt this week.  Victorian Mutton did come back from record highs, losing 39¢ to 614¢/kg cwt.  Victoria is still the strongest in the state, just not as strong as last week.

Lamb slaughter remains well below last year, despite plenty flowing out of the south. The north-south split remains, but both NSW and Victorian lamb slaughter were 10,000 head below 2018 last week.

Figure 3 shows the Eastern States Trade Lamb Indicator (ESTLI) is still in decline, losing another 20¢ this week to 705¢/kg cwt. The ESTLI is still holding a 44¢ premium to last year, obviously being helped by tighter supply.

The National Mutton Indicator is at a 140¢ premium to last year, so it is doing a lot better.

WA Trade Lambs moved past the east coast this week, up 7¢ to 716¢/kg cwt, which combined with the ESTLI fall saw WA the more expensive.  In Victoria you could almost say trade lamb prices (686¢) tanked, losing 35¢ to be the cheapest lambs in Australia, apart from Tasmania (646¢/kg cwt).

Next Week:

The latest BOM outlook is less than promising for the east coast. If it remains dry we could see supplies remain strong, with females and Merino wethers adding to supply. If it gets wet, lamb prices probably have further to rally than sheep.

WA closing on the east coast

Despite the free-flowing supply in the south Victorian lamb prices found some support, while mutton moved to a new record. WA lamb prices have also rebounded strongly and are now not far off the east coast.

It might be that Victorian lambs are finding support from mutton. The spread between the two prices, usually quite large, has this week come into 78¢, with mutton at just a 10.5% discount. The mutton discount is about as small as it gets, but last time it was when restocking was in full flight.  This time it is more about export demand.

Figure 1 shows Victorian mutton sitting at a new record of 643¢/kg cwt, now well ahead of NSW. It might be that fat sheep are coming out of Victoria, supporting the ¢/kg rate, relative to lighter sheep in NSW.

Lamb supplies appear to be tightening in the west, with trade lamb prices rising to a 3 month high of 709¢/kg cwt. Figure 2 shows that lambs in the west are now coming close to their east coast counterparts, after being at a discount for some time.

Mutton in WA remains at a large discount to the east coast.  It seems supply is still outstripping kill space, but as lamb supplies decline we might see some upside in mutton. WA Mutton might not get to east coast levels but should get stronger

Next Week

Lamb slaughter is heading sideways, and it seems it might have hit its limit for now. This obviously bodes well for prices, with 700¢ looking like the support level. There are apparently plenty of lambs booked up for December but some space might become available if mutton supplies decline.

Wool market back to the base

Since October, we’ve seen the market oscillate from gains to losses at the turn of each week. However, this week saw the second consecutive week of declines with both the eastern and western markets ending November back near the base levels found after the period of volatility during Winter.

The market has largely traded within a 100 cent comfort zone for the last two months and is currently closing in on the lower end of that range. The Eastern Market Indicator (EMI) lost 30 cents, on top of last week’s 19 cent fall to close at 1,530 cents. The AU$ fell marginally by another 0.03 cents to US $0.676. In US terms this pushed the EMI down 22 cents to 1,035 cents.

Fremantle fared the best of the three selling centres In the weakened market but didn’t escape a fall of 15 cents in the Western Market Indicator to end the week at 1,640 cents.

High pass-in rates continued, with 14.2% of the national offering passed-in. This was a small decrease of 1.5% compared to last week’s rate. Supply was slightly lower this week, with the national offering down by 471 bales to 37,827.  The number of bales sold was nearly unchanged at 32,464 for the week. This season’s bale clearance continues to lag well behind 2018 at a difference of 100,058 bales. The average weekly bales volume is currently 5,266 behind last year.

The dollar value for the week was $54.03 million, with the average bale value sitting at $1,664, drifting $27 per bale below last week’s average. The combined value so far this season is $895.47 million.

The crossbred sector edged lower again with 26 to 28 MPG’s losing 30 to 45 cents. The broader microns received more support with just a 10 cent decline for 30-32 MPG’s. The Merino Cardings Indicators managed to hold their ground for a second week in a row, remaining relatively unchanged.

The week ahead

Another large offering is on the roster for next week with 41,274 lined up across the three selling centres for sales on Wednesday and Thursday.

With just 3 more weeks of sale before the market closes for the Christmas recess, volumes are tipped to remain strong with 39,513 and 37,278 bales scheduled for the following weeks.

More of the same for lambs and sheep

Sheep and lamb markets are doing funny things. Lamb slaughter is well behind the same time last year, yet prices keep falling. Sheep slaughter is the same as last year, and on the rise, but prices remain steady.

Figure 1 shows east coast lamb slaughter, which for the week ending the 15th of November was 6% below the same time last year. Victorian lamb slaughter was very close to last year’s levels, it was NSW and South Australia dragging the chain.

With Victorian lamb supply starting to flow, the Eastern States Trade Lamb Indicator (EYCI) continued to drift lower. It wasn’t only Victorian lambs that were cheaper, however.  Victorian Trade Lambs were down 26¢ to 703¢/kg cwt, while in NSW they were more expensive but still down 24¢ to 732¢/kg cwt. The ESTLI was not surprisingly in the middle of the two main states, at 718¢/kg cwt (Figure 2).

The ESTLI is still 29¢ stronger than the same time last year, which is partly explained by the lower slaughter.

We looked at the stronger sheep demand earlier in the week and it has continued. Figure 3 shows sheep slaughter lifting again last week to equal last year’s highs. The east coast mutton indicator was steady at 594¢/kg cwt this week, a massive 169¢ premium on last year.

Lamb prices in the West found some strength this week, up 20¢ to 680¢ and a three month high.  Mutton prices are still behind the east coast, at 458¢, while restocker lambs look very cheap at 475¢/kg cwt.  We suspect it was a small yarding.

Next week

There isn’t much rain on the forecast for the next week and the BOM has today given another depressing three month outlook.  It might be more of the same for lamb markets as Victorian supplies continue to flow.

Market unable to sustain momentum

Grower reaction to the recent better wool market resulted in an increased offering, however, this proved too much for the market and it lost momentum this week. AWEX reported that the retracement was across the board, following the weak finish in Fremantle last week.

While the trend for the week was softer, on the final day some support was evident and Fremantle was quoted as “ending on an encouraging note”.

The Eastern Market Indicator (EMI) gave up the 19 cents gained last week to close at 1,555 cents. The AU$ fell marginally by 0.03 cents to US $0.679. This meant the EMI in US$ produced a small retracement, losing 13 cents for the week to 1,057 cents.

The softer market saw the Western Market Indicator (WMI) down 22 cents on the week to close at 1655 cents.

Again, growers were happy to resist the softer market. The pass-in rate increased to 16.1% for the week, up 9% on last week. The national offering of 38,297 bales was a 2,000 bale lift to last week’s volumes. Despite an increased offering, bales sold, at 32,143 was 1,500 bales fewer than last week’s total. This season’s bale clearance continues to lag well behind 2018 at a difference of 100,639 bales. The average weekly bales volume is currently 5,500 behind last year.

The dollar value for the week was $54.37 million, with the average bale value sitting at $1,691, $90 per bale below last week’s average. The combined value so far this season is $841.1 million.

The crossbred sector is following its normal pattern, finding its lows over the past 5 years in November & December. On a positive note, recent history shows a firming trend for the new calendar year. The skirtings market found good support, especially for better style finer types, while cardings remained largely in line with last week.

The week ahead

A relatively large offering is scheduled for next week’s sales with 39,280 bales currently on the roster across the three selling centres. Again we pin our hopes on the encouraging tone observed in Fremantle to the end of Thursday’s sales.

Wool preparation categories

It has been a decade since the Sheep’s Back to Mill was updated. The Sheep’s Back to Mill publication is a record of the cost of harvesting, testing selling and shipping greasy wool in Australia to overseas mills. One of the components of this publication is the proportion of the wool clip which passes through rehandles/bulk class facilities. This article takes a look at wool preparation in the clip, which in turn determines how much wool passes through rehandling facilities.

The latest Sheep’s Back to Mill (for 2009-2010) is available here. Traditionally this publication develops the cost of rehandle (‘bulk class’) by using the AWTA fee applied to the proportion of the clip sold in this manner. This method underestimates the cost of putting wool through a rehandle.

There is often a mismatch between the grower being paid out on rehandle wool and when the rehandle wool (which is aggregated with like wool from other growers) is sold. For this reason and the extra work involved, the broker will make a margin on the rehandle wool. It is a grey area that is not transparent and rehandles are profit centres in the broking business, so the less wool put through rehandles the better for growers. The counter-argument is that farmers can end up with parcels of wool (bags and butts) which are not large enough to make up a sale lot. Such small lots are legitimately aggregated into sale lots in good rehandles.

At Australian auction sales, wool is offered with an IWTO approved test certificate which shows the wool preparation standard for the lot (commonly known as the ‘cert type’). Table 1 shows the proportion of wool sold (clean basis) at auction during the past eight seasons by ‘cert type’. P certificate wool is a classed grower lot that meets the AWEX Code of Practice (COP) standard while the D certificate is a grower lot that does not meet the AWEX COP. I stands for Interlot wool. The Q and B suffix denote wool which has gone through a rehandle. Q certificate wool meets the AWEX Code of Practice while B certificate wool does not. Table 1 shows that between 10% and 11% of the Australian clip sold at auction passes through rehandles.

Figure 1 provides a breakup of wool sold at auction in 2018-19 by breed on a clean basis. Merino (and superfine) accounted for 78% of wool sold while crossbred accounted for 21%. Downs, carpet and other categories (such as runs with) accounted for 1% of the sales volume.

Table 2 breaks each breed up by wool preparation category. Some 7.6% of Merino wool (nearly 8 bales in one hundred) was processed through rehandles, with 17% of crossbred wool handled through rehandles. Note also the low level of P wool preparation standard for crossbred (45%) which reflects the decline in the standard of crossbred wool preparation in recent years.

What does this mean?

Some eight bales in one hundred of the Merino clip are processed by rehandles, which as an average seems high. Rehandles are not a charity – they have a cost. Marketing begins on the farm with judicious packaging of wool for sale, which meets the AWEX Code of Practice, not in Paris or Milan.

Sheep prices defy volumes

Mixed signals for the lamb market this week as the spring flush appears underway in South Australia, but Victorian volumes still sheepish. Speaking of sheep, mutton prices are holding up resolutely in the face of elevated volumes at the saleyard and at processors.

East coast lamb prices reported by Meat and Livestock NLRS shows a 12¢ lift for the Restocker Lamb indicator to see it close at 820¢/kg cwt, underpinned by a big lift in SA Restocker prices which posted a 75¢ gain to 952¢. East coast Trade and Heavy lambs easing 15¢, with softer moves reported in Victoria and NSW for these two categories, to see them finish at 744¢ and 739¢ respectively.

Lamb prices in SA holding up reasonably well across categories this week with Heavy and Merino Lamb the only types to register a negative, and a small one at that, down 1¢ and 2¢. A good result for SA lamb producers considering the recent trend in yarding numbers show that they are amid their spring flush – Figure 1.

The wet week in Victoria seemingly taking some of the steam out of lamb yarding numbers there though, with weekly sale yard volumes easing back toward 50,000 head recently. Lower Victorian lamb numbers pushing the broader east coast lamb yarding levels to 175,000 head, 18% under the seasonal average for this time in the year.

East coast sheep yardings have softened during early November but they are coming off very high historic levels so they remain above the upper end of the normal seasonal range that could be expected for this time in the year and 30% over the five-year average trend– Figure 2.

East coast sheep slaughter remaining at elevated levels too at the top end of their normal seasonal range and running 16% over the five-year seasonal trend – Figure 3. Despite the high sheep supply east coast mutton prices are holding firm, posting a 9¢ lift to close yesterday at 590¢/kg cwt.

Next week

Limited rain is on the horizon in the coming week, even for Victoria which has been quite blessed in the lead up to summer. Late November/early December usually sees a significant lift in lamb volumes at the saleyard as the spring flush hits full throttle so there is likely some further pressure to be applied to lamb prices in the short term.