Next stop $10?

A little bit of precipitation seemed to go a long way this week. Lamb prices jumped for all east coast categories, with the restocker lamb surprisingly doing the most. Meanwhile, heavy lambs smashed through another milestone, next stop $10.

There was some rain about in northern NSW, but it was in Victoria where restocker prices ramped up significantly. Figure 1 shows the National Restocker Indicator gaining 25% this week to hit a new record of 877¢/kg cwt.

In Victoria, the restocker lamb Indicator gained 33% to break through the 900¢ level and hit 938¢/kg cwt. For a 35kg lwt lamb, this equates to $146/hd with a $5 skin. It was only the start of July when we were getting excited about receiving $146 for 20kg lambs.

Restockers buying these expensive lambs will be okay if they are still getting $200 for 22kg cwt lambs, but looking at the forecast rainfall map (released yesterday), one might be inclined to take the great money for store lambs.

The best chart we have seen this week is Figure 3, with the symmetry of the declining lamb slaughter and rising sheep slaughter. Lamb slaughter was at its lowest full week level for five years and sheep slaughter at its highest level since 2014.

Despite the strong slaughter, mutton values rallied this week. The east coast mutton indicator gained 27¢ to 470¢/kg cwt. Processors aren’t making money on lambs, and while they might not be making money on sheep, they are losing less. Hence the extra demand for sheep.

What does it mean/next week?:

Is the next stop $10?  Well, it’s not impossible as the supply of heavy lambs isn’t going to ramp up any time soon.  At this time of year, it’s hard to see a grower with lambs at 45-50kg lwt worth $200 having the courage to hold them for another six weeks to get them to $300 lambs.

It will be the sheep markets turn to rally next, if and when it does rain there will be a supply squeeze like we haven’t seen since 2013.