VICTORIAN lamb producers have been told forward prices from processors were likely within the next two weeks.
At an information day at Dunkeld this week, Minerva Foods ALC livestock manager at Colac Angus Lloyd said he appreciated it was “pretty tough” at current costs and export lamb prices to expect producers to feed lambs.
“The store lamb at the moment looks a fair bit more viable than what it was – I know the price is back.
“We’re still working through a January-February price currently; ourselves we are sort of sitting at $5.20 (per kg cwt) for January, but that’s not set in stone and gospel,” he said.
“We have to be able to sell the product as well and see where that lands for us.”
He personally didn’t think $5.20 would be enough to encourage producers to put lambs on feed.
“I can see shaking heads in the room and I understand that.”
He said the “bigger picture” included buying at a cost that enabled the company’s marketers to sell the end product while offering a price to encourage producers to shear lambs and feed them on.
Mr Lloyd suggested there would be “a fair crunch point” in the next 5-10 days, at which processors would decide whether on a forward price strategy.
“I reckon by this time next week we should be able to have something.”
“I would like to see us go out (with a price) through January and early February, which is what we’ve done typically in the past.”
Mr Lloyd said processors would need to come out with forward prices, otherwise they would not have the required heavy lamb supply in the New Year.
“And not just the New Year; going into the rest of the year.”
Mr Lloyd had no comment on heavy mutton, with the plant is not currently trading into China, while it waited on efforts to relist with country after voluntarily halting supply to conform with Chinese COVID rules on Federal Government advice. ALC’s relisting into China would enable the company to compete against other processors on heavy mutton, he said. However, he expected there was some “upside” in mutton prices to come.
Mr Lloyd said the supply of sheep and lambs coming into the system was keeping prices down.
“We want to be able to put a price that is competitive and so you can feed, so we’ll have something to kill.”
Mr Lloyd said ALC had an 18-32kg lamb grid at Colac, allowing for a good spread of lambs for producers, with 16-18kg lambs and 32-36kg discounted 50 cents, and currently booking lambs in at $4.50-$5. The mutton grid is 16-24kg for boxed product at $1.30/kg.
“We need to kill some numbers out of the system and it is taking time because there’s plenty of them.”
Mr Lloyd said there is still a lot of sheep meat bought at higher prices in freezers around the world, and pork and chicken has been more affordable.
“There is definitely (sheep) meat moving but there are still a lot of cuts that are hard to move.
“It’s coming off the back of COVID and people are doing it tough enough now – it’s tightened up.”
Mr Lloyd said ALC’s Colac plant is currently processing 13,000 lambs, light mutton and rams daily during the week and a further 5000 on Saturdays. He said breed type not an issue.
“We’ll basically take anything; it’s to a quality in that 18-32kg spec.”
He said grass seed on skinned carcases has been a massive issue, mainly from northern area lambs. It slows down the processing chain, puts a processor’s licences at risk and processors have had to kill seed-affected lambs to get them out of the system, Mr Lloyd said.
He said the skin market has been very tough, but sucker skins have improved to $2-$4 with the restructuring of major buyer Dynasty and the re-entry of other companies, but China was the only market.
Buy heavier and feed for less time
Australian Probiotic Solutions nutritionist and former grain trader Tim Huggins ran through a series of gross margin lotfeeding scenarios for different feed regimens, covering nutritional and health requirements.
He suggested that lamb lotfeeding can pay this year, but producers might have to do things differently to what they had done in the past.
“Most people know that the price is not as good as it was last year, or the last couple of years, but if you cast your mind back, what is the average margin you would make from a lamb over the last 10 years.
“So this year we are all agreed it won’t be as big as it was, in terms of the amount that you actually get to hand onto, but historically that amount might still be alright,” he said.
The scenarios were based on starting with 38kg lwt lambs. He said there would be more value in producers purchasing heavier lambs that have more developed rumens, aiming at liveweight gains of 350-400gms/day and feeding them for a shorter period.
Click here to see Tim Huggins’ presentation including lotfeeding scenarios and assumptions.
Recent forward lamb price discussions around $6
During the Dunkeld day, producers were told a northern processor had offered $6/kg cwt for lambs in January. However, Sheep Central enquiries indicate the report reflected early negotiations on forward prices with producers and nothing had been confirmed.
Processors are reportedly keen to underwrite forward supplies, qualified by their estimations of likely forward availability of good slaughter lambs from saleyards or feedlots. Sheep Central was told the difficulty with forward pricing to producers was knowing what global market demand will be, although this was expected to become clearer in the next month. One processor said it was a matter of sharing the risk with producers while wanting to incentivise lamb finishing. Most processors have reportedly worked through most of their stocks and the market was more “free-moving”, but another issue has been recent record lamb kills putting a lot of product into the supply chain.
“There isn’t the confidence in global demand as there has been in previous years, so the issue is at what level is it fair reasonable to incentivise people to feed and being responsible about what the returns may be.”
There is not expected to be any shortage of sheep meat product on global markets in the medium term.
A forward lamb price is imperative
Elders Bendigo livestock manager Nigel Starick said today it is imperative that processors coming out with a solid price for lambs into January to justify producers buying lambs for feeding.
“There is very little confidence at the moment to put store lambs without a solid rate for lambs for January, February, March.
“It (the price) should start with a ‘6’ ($6),” he said.
“Or higher, they would all love more.”
Mr Starick said most of New South Wales is in dry conditions with “no weight” in lambs and big numbers of 25kg-plus lambs were also not expected off grass in Victoria this season until next January. He said a shortage of heavy lambs out of the north meant processors needed to give some forward price indication.
“For the industry, there just needs to be some price set so that people have something to aim for, at the moment everyone is guessing.
“It’s hard to back producers into putting lambs out if they don’t know what the return is going to be.”
Western Victoria is ‘an inch off a bloody great season’
Lanyons auctioneer at Hamilton Warren Clarke said the season is cutting out across western Victoria.
“We’re an inch (of rainfall) off a bloody great season, and the further south you go, the worse it gets.”
He doubted that the region’s lambs would have the weight of last year.
“Our early drop lambs are going to be alright, with export weight lambs few and far between – the Spring-drop lambs are going to struggle again.
“Last year it was too wet, this year it’s too dry.”
He said later rain would be too late and although Summer crops had been planted, “they all want a drink.”
Mr Clarke estimated 60 percent of the region’s Summer crops were up, but needed rain.
He agreed processors needed to come out with forward lamb prices soon to give feeders some direction.
“And it’s got to be in the high $5s for it to be worth feeding them.”
Forward prices might generate some store lamb competition, he said.
“I can’t see where the store lamb competition is going to come from.
“Everyone is hurting from last year.”
Without a forward price the risk was that producers would sell all their lambs this year rather than shear and retain some for later sale, he said.