Producers sending lambs to the saleyards early in the year may feel like they are competing in a lottery with many lambs to be slaughtered between now and January already booked in.
But the latest Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimates forecasts lamb prices to maintain high levels into 2019 due to supply constraints, increasing by 18 per cent to to average 725 cents per kilogram carcase weight.
The rise in prices is due to strong export demand coupled with tightening domestic supply.
Interestingly, at the same time last year, the Eastern States Trade Lamb Indicator (ESTLI) hit a new record high of 661c/kg cwt.
This year the price is the same, yet producers are counting the missed opportunities of locking in prices at over 100c better.
Angus Brown of Mecardo said prices over 880c are also a recent memory, which adds to the perceived loss.
“We know, however, that prices over 600c are highly profitable for those lamb businesses which haven’t been in drought, and hence the flow of lambs this November and December has been strong,” Mr Brown said.
“There will be some interesting supply and demand functions over the coming month.”
He said the recent rain falls across the eastern states should encourage retention of lambs, however, anecdotal reports suggest many Victorian processors are fully booked for January.
“We may see light lamb prices rally and finished prices steady, that is unless the dearth of supply in NSW worsens and drags all prices higher,” he said.
But sheep is another story, he said.
“It’s very hard to see sheep slaughter maintaining current levels with crucial northern sheep regions getting a good downpour,” Mr Brown said.
“We haven’t seen mutton indicators above 500c for any extended period of time since the middle of 2017.
“Next year could be a record breaker for mutton.”
However, the December ABARES edition of agricultural commodities said saleyard sheep or mutton prices are forecast to be constrained, though estimated to lift three per cent tp 430c/kg cwt in 2018-2019, due to increased slaughter.
The national sheep flock is forecast to fall two per cent year-on-year to 68.5 million due to high sheep turn-off this financial year.
Lamb production is expected to decline slightly due to the parched season with spring lambings forecast to be lower due to limited pasture availability and high supplementary feed costs.
Numbers of lambs available for slaughter in autumn 2019 will also be reduced.
Yet the bureau said the strong export demand and high global prices will provide processors with incentives to maintain throughput.
And if seasonal conditions improve, high lamb prices will provide producers with an incentive rebuild their flocks.
In NAB’s monthly Rural Commodities Wray released on Monday, the NAB Rural Commodities Index fell by two per cent following lower grain, wool and lamb prices.
NAB Agribusiness Economist, Phin Ziebell, said lamb prices fell with the spring flush but are now back to year-ago levels.
“The National Trade Lamb Index is sitting at 663c/kg, following a 875c/kg peak in early December,” Mr Ziebell said.
“Despite this, lamb prices remain very high compared to historic standards.”
The value of livestock and livestock products is forecast to increase by two per cent to almost $30 billion.
Farm profitability is likely to be lower in 2018-19 primarily to lower production and rising output costs, with the most sever impacts on those regions affected by drought.
