AUSTRALIA’S largest meat processor has warned of low profits for the autumn new year market for producers buying restocker lambs in the current price frenzy.
With store lambs averaging $98 a head last week, or 622 cents a kilogram carcase weight, JBS Australia's southern livestock manager Steve Chapman said the inflated prices would impact producers’ profitability.
“The restocker market is too high so I’m concerned there will be low margins coming into autumn and winter with where the market situation is,” Mr Chapman said.
“Lambs should be $75 to $85 and producers are paying $20 more than that.”
Influenced by grass fever and cheap grain, Mr Chapman said the “extreme” producer confidence was out of touch with returns indicated by forward contract prices in the new year.
“Restocker confidence in the last couple of months has been extraordinary,” he said.
Despite the restocker frenzy, National Livestock Reporting Service data shows a dramatic decline in restocker activity this financial year.
Only eight per cent of lambs offered at major eastern states saleyards were purchased for autumn production backgrounding, marking the lowest restocker performance since 2012.
This year’s activity is less than half of the 19pc which were purchased for the same period last year when dry conditions and softened prices resulted in a higher turnover of store lambs.
“Lambs were only costing $80-$90/head last year so people would take them on and feed them grain,” TB White and Sons livestock manager Xavier Bourke said, Ballarat, Victoria. “This year, a lot of farmers can’t get their heads around paying $100 to $110 for store lambs.”
The forward contracts could also struggle to inspire producers to invest in lambs for backgrounding, with the autumn new year market of 480 to 520 cents a kilogram fetching 25 to 50c/kg below last year.
“Lambs on the ground are about 10pc down and the number of ewes people traditionally run is back 15pc as well – with these two factors, there has to be less lambs around,” he said.
NLRS have reported a 5pc fall in slaughter numbers compared to the same period last year and almost 10pc less to 2014.
Mr Bourke said heavy destocking as well as a drought-induced fall in lambing percentages had contributed to the fall in slaughter numbers.
Analysts predict a flurry of activity after the grain harvest, which Mr Bourke said would see livestock walk grain off farms instead of it being trucked off.
“You rarely get cheap grain and cheap stock,” he said.
Annabelle Cleeland
Annabelle Cleeland is Fairfax Media’s national sheep and wool writer. Annabelle joined the Fairfax team in 2012 to nurture her love of Australian agriculture. She began as the Victorian western district reporter at Stock & Land before taking on a senior position as a journalist reporting on all industries statewide. Annabelle’s appetite to report on issues which affect the sheep and wool industry has seen her travel to many parts of Australia and abroad. She is excited to spin industry yarns during a period of substantial demand for the sheepmeat and wool industries. Annabelle enjoys horse riding and climbing mountains, and is a lazy supporter of the Geelong Football Club.
Annabelle Cleeland is Fairfax Media’s national sheep and wool writer. Annabelle joined the Fairfax team in 2012 to nurture her love of Australian agriculture. She began as the Victorian western district reporter at Stock & Land before taking on a senior position as a journalist reporting on all industries statewide. Annabelle’s appetite to report on issues which affect the sheep and wool industry has seen her travel to many parts of Australia and abroad. She is excited to spin industry yarns during a period of substantial demand for the sheepmeat and wool industries. Annabelle enjoys horse riding and climbing mountains, and is a lazy supporter of the Geelong Football Club.
