With producers paying big money to secure store lambs and breeding sheep, the question is being asked, is the market over-cooked and are producers running headlong into trouble with high priced purchases?
Figures from the National Livestock Reporting Service, analysed by Fairfax Ag Media, indicate a divergence on last year with lamb and mutton slaughter rates up 4.6 per cent and 23pc respectively, from September to December, during a time when throughput at abattoirs was supposedly being cut back.
“It is all processors - there is something else this time, the export job has gotten stronger,” says respected Wagga Wagga auctioneer, James Tierney, Riverina Livestock Agents.
“We need to look at the market differently now.
“It is a niche product, unlike beef, and we are competing with NZ, whose flock is declining, and China, who consume what it produces, at a time when there is a big thirst for lamb.”
What is driving the buying frenzy are processor concerns of a lack of supply come late summer, he said.
Export weight lambs are already lacking from the summer offering, at a time when major export orders were evident in the buying gallery.
While some processors speculate an increase in saleyard throughput is attributed to recent abattoir closures, agents argue an increase number of regular direct-to-works sellers were being lured to the yards with the expectation of higher prices.
Abattoirs on the closure list, include Australian Meat Group, Deniliquin; NSW, JBS’ Longford and Cobram; Manildra Meat at Cootamundra, NSW, and McGillivray’s Gunbower, Victoria plant.
When asked if overseas and domestic demand was spurring higher prices, or was it the shortage of supply following a spring-offload prior to the early summer rain, Mr Tierney said it was both factors.
“But there is something else,” he said.
“Kills would have been cut by now if processors thought prices were too high.
“If processors don’t tell us, how do we know otherwise?
“So we have to guess and I’d say it is driven by pretty good inquiry from overseas.”
He said the purchase of the 366 first-cross lambs for a saleyard record of $254.60 at Wagga Wagga lamb sale last week, paid by export processor, Fletcher International, reflects the export strength.
“This suggests that exporters seem to have acquired good overseas orders and are very strong in the market,” Mr Tierney said.
“I would quote Wagga as nearly the dearest sale per kilogram that I have ever seen.
“It happened in a week when Hamilton yarded 80,000 lambs, Ballarat 50,000, Mount Gambier 20,000, and Wagga Wagga 30,000 - there has to be another factor underpinning this that we don’t know.”
Contacts have confirmed major processors, who are offering forward prices, have indicated January forward contracts are almost filled, with prices up to 630c/kg.
Fairfax Ag Media can also confirm that throughput at major saleyards in Victoria, South Australia and NSW, has risen by about 12pc in the last three months, compared to the same period last year, while slaughter for has increased just 4.6pc in this period.
Meanwhile, about seven export orders for light lambs (Muslim kill) are also giving restockers a run for their money at sales in the southern states.
Mr Tierney said while restocker prices were relative to returns of fat lambs, the “danger” would be if the market softened suddenly, especially for lot feeders who were grain feeding stock.
“Usually 70pc of lambs would go over the hooks and 30pc through the saleyards - it is certainly not like that now,” Mr Tierney said.
“There are not as many going over the hooks because auction prices are so much strong.”
However the unsung hero could be the mutton market, which traded consistently above 400c/kg in the last 12 months trade and up to 550c/kg at its peak in winter.
Extreme weather conditions, matched with market confidence, has pinched the mutton supply, says Elders, southern livestock operations manager, Ron Rutledge.
“The tight winter and late spring in the Western Division (NSW) exacerbated the mutton numbers so people couldn’t hold stock which they intended to keep,” Mr Rutledge said.
“That accounted for up to 15pc more mutton being sold, subsequently it has rained in the north, which has left a void with producers understocked.
“The mutton job is being underpinned by restockers because the opportunity to buy ewes through spring was so limited.”
He said a pivotal factor had been the sell-off of breeding stock by major corporate and large scale operations that sold extensive numbers of older ewes direct to meat works in anticipation of the tight spring.
“This had a significant bearing on the processors’ throughput figures and has prevented many restockers from buying older ewes,” he said.
“Prime first-cross lamb producers have also kept the older ewe market buoyant. They’re getting returns in excess of $200 for crossbred ewe lambs – to keep their numbers up, they have turned to buying in older ewes.
“Processors have had to match the current rates spurred by restockers, hence most mutton processors are living week-by-week.”