Sheep and lamb market price drop
09 July 2020
- Eastern states lamb indicators are now tracking below year-ago levels
- Easing offshore demand has put downwards pressure on prices
- The timing of a recovery in global markets and the impact of new season lambs hitting the market will be key to future livestock price movements.
Sheep and lamb prices have remained robust since the start of the year, despite volatile market conditions, surging to record levels in March. While strong competition between processors and restocker buyers, on the back of an already tight supply pool, sustained prices at these elevated levels for the first half of the year, easing offshore demand has pushed all eastern states lamb indicators below year-ago levels in recent weeks.
Lamb prices moved into an unprecedented territory in the first quarter, with the eastern states restocker lamb indicator sitting above 1,000¢/kg carcase weight (cwt) for most of February and March. Despite a strong performance, limited supplies could not offset the downturn in prices this week with the indicator falling below year-ago levels for the first time this year, to 818¢/kg cwt – a 53¢/kg (6%) decline on the same week last year. Trade lambs followed similar trends, down 170¢/kg or 18%, to 755¢/kg cwt.
While total yardings were higher this time last year, so too was the demand for Australian sheepmeat, which saw high prices uphold over winter and peak over July and August. This year, however, ongoing uncertainty in global markets has contributed to subdued export demand. Unsurprisingly, processor activity has softened and prices responded accordingly, easing much earlier than the winter price trends seen over the last two years.
Heavy lambs also saw significant declines this week, down 25% on year-ago levels to 719¢/kg cwt, a six-month low. The US, a major Australian market for lamb, continues to drive this decline with reduced lamb imports. With a significant portion of imported Australian lamb going into foodservice, a recovery in heavy lamb prices will likely be underpinned by improved consumer demand.
The mutton indicator has shown modest declines since the start of June, albeit remaining above year-ago levels to average 602¢/kg cwt on Tuesday 7 July. China demand for mutton has remained strong which has supported mutton prices and the domestic availability of sheep in Australia has declined to a much greater extent than lamb throughput.
While prices have responded to the demand shortfall, further declines could present, should subdued demand persists into the spring, albeit domestic demand for lamb should provide an element of support. Strong restocker demand at a domestic level, combined with fewer lambs on the ground may also provide a cushion.