SOUTHERN Australia’s hot and dry conditions have forced an increased number of lambs on the market, resulting in the Eastern States Trade Lamb Indicator (ESTLI) dropping 5per cent year-on-year, to 525 cents per kilograms carcase weight.
Last week Western Australia trade lambs averaged 487c/kg cwt, down from 517c/kg last year, while Tasmania trade lamb prices surged from 485c/kg to 571c/kg week-on-week.
Tasmania’s volatility was attributed to the low volumes, with market analysts suggesting the southern state’s trade lamb prices would return to a 20-40c/kg discount to the ESTLI in the coming weeks.
While 9pc more lambs had been processed for the year-to-date, the forecast for lamb slaughter is 21.5million head, down 3.4per cent on 2015 which finished at a record 22.9m head slaughtered.
Because of the back-to-back years of high slaughter peaking above 22m, Meat and Livestock Australia market information manager Ben Thomas anticipated 2016 was a flock consolidation year.
“There has been continual growth in the number of lambs processed every year for the past 15 years,” Mr Thomas said.
“Australia’s transition from wool production to now more prime lamb production has had a cyclical pattern where there is rise in numbers processed and then there is consolidation for a year or two, and then a rise again.”
The early spring offload of lambs and forecast reduced slaughter numbers pointed toward tighter supplies through winter.
The first pricing indication for the autumn and winter was out with JBS Australia releasing their long term forward contracts.
Prices to August for crossbred and Merino lambs reflected this potential tightening supply with contracts starting at 500cents per kilogram carcase weight for crossbred lambs and 470c/kg cwt for merino lambs for February and the first half of March.
The forecast contraction of supply in winter is reflected with JBS offering a price rise to 570c/kg and 540c/kg cwt for crossbreds and Merino lambs respectively in the last week of July.
The demand for Australian lamb in 2016 will continue to be heavily influenced by international customers.
Factors at play include New Zealand’s drought, which Mr Thomas said had resulted in lamb numbers hitting a 60-year low and could have a positive impact on Australian exports.
“As Australia’s largest competitor, this will be interesting to see just what their production will be,” he said.
However large production in China over the past two years had resulted in high volumes in cold stores, and could impact demand.
While exports to the US and Middle East were forecast to climb on the 2015 levels, the current low oil prices in the Middle East had reduced government and consumer spending.
“There are a couple of positives working in the producers’ favour but they need to be weighed up with those looming export factors that could subdue demand,” he said.
Stock and Land