Trade lambs keep springing

22 November 2016

Provided there are no unforeseen slumps in the Australian lamb market over coming weeks, 2016 will mark the fourth consecutive year that Australian spring lamb prices were dearer than the year prior.

As illustrated in the chart below, the National Trade Lamb Indicator dropped to a seasonal, and annual, low of 386¢/kg cwt in 2013. The same seasonal low didn’t drop as far in 2014, where it landed at 452¢/kg cwt, before the same pattern occurred in 2015 and the bar was raised again, to 469¢/kg cwt. With only four full weeks of saleyards operating to go for 2016, the lowest the National Trade Lamb Indicator has been this year is 528¢/kg cwt – raising the bar yet again.

What’s most remarkable about the sequence of the past four years is that Australian lamb production has also increased over this time, which normally acts as a suppressant on prices. However, what has been of much greater benefit to the market, has been the general decline in the A$ over this period, as well as reduced competition from New Zealand (NZ) on the trade front, and more consistent annual supplies.

A similar pattern has in fact occurred in the past – specifically for the years 2009-2011. The primary driver during this time was Australian sheepmeat production being the lowest it had been in decades, as the flock recovered from an extended period of drought liquidation. Headwinds came to the market in 2012 and 2013, though, when the A$ averaged above parity with the US, combined with a recovery in sheepmeat availability.

For the period before that (2001 through to 2008) the National Trade Lamb Indicator largely traded between 300-400¢/kg cwt, with the greatest limitation to higher prices being international competition, particularly from NZ.

Further analysis on what to expect for the years ahead will be examined in the upcoming 2017 MLA Sheep Industry Projections, which will be released on Tuesday 6 December.

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