A LACK of robust competition in the saleyards has forced lamb prices lower and left some producers and lamb finishers wondering how far the market can fall.
At the end of trading on Tuesday, trade lambs in NSW were averaging 470 cents a kilogram (carcase weight), about 16c/kg softer than a month ago.
The finished export lambs were also cheaper and averaged 453c/kg.
The National Livestock Report-ing Service said the falls across the eastern States were due to three main factors.
Unlike the north, which was still struggling with an abundance of rain, the south had been hit by hot dry weather, putting the breaks on restocker demand.
Processors had also been more selective in the lambs they bought, while the strong Australian dollar remained a thorn in the side of exporters trying to attract overseas buyers.
Forbes Livestock and Agency Company director Tim Mackay, Forbes, said there’s not really any signs of the market picking up in the short term.
“There’s been a bit of vendor backlash to the cheaper prices,” he said.
“This week we are seeing the lamb numbers falling away at many centres in NSW as people hold onto their lambs.
“Last week at Forbes there were about 24,000 sold, whereas this week it’s halved and the draw was only for about 12,000 head.
“This is the result of the massive correction we saw last week, where all categories fell between $5 and $15 a head.”
Mr Mackay said there were not many lambs making above the 500c/kg mark.
“The trades are worth about 460c/kg to 480c/kg while the heavier types are coming in at about 400c/kg to 450c/kg.”
He said producers who bought restocker lambs for about $95 a few months ago were only looking at about $120 to $150 a head for those lambs in the saleyards today.
“It certainly makes the margins pretty tight now,” he said.
Most of the lambs offered were now shorn as many producers took advantage of the better prices in November and December and sold their sucker lambs.
Rabobank food and agribusiness research and advisory general man-
ager Luke Chandler said agri commodity markets would face a “soft landing” in 2012 after prices for many commodities, such as lamb, hit record levels in early 2011.
“While the outlook for the global economy has soured, growth in the emerging economies remains supportive of demand, and supply remains tight for many agri commodities with global inventories resting at modest levels,” he said.
“An historically high dollar will continue to challenge export competitiveness and earnings, while the risk of further downward revisions to global growth cannot be ruled out,” he said.
Mr Chandler forecast sheep and lamb prices to continue to decline in 2012 (compared to pre-2011 figures) yet remain elevated assuming drought conditions did not return.
“Australian supply will increase, as will production in New Zealand, Australia’s main competitor in export markets,” he said.
This sentiment echoes those of Meat and Livestock Australia (MLA) in its recently updated mid-season industry projections.
But MLA said overseas demand was expected to limit the potential fall in prices due to the ongoing buying strength from the Middle East, greater China and a forecast recovery in shipments to the US.
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