Lamb Processing

JBS well on the way to $85m forward lamb contract commitment for spring-summer

Terry Sim, July 15, 2016

Processing-lamb-1FORWARD lamb contracts by JBS Australia have been quickly taken up by producers, with the company well on the way to making what will be an $85 million industry commitment.

Strong uptake of the contracts within weeks of their release has meant kill space is almost fully committed for August, September and October at the company’s Bordertown and Cobram plants.

As from July 1 this year, the company is seeking Meat Standards Australia-certified news season crossbred and Merino lambs, and shorn crossbred old lambs in the 18-32kg from producers.

At Bordertown, JBS is offering 600c/kg for suitable crossbred new season lambs in August, from 540-580c/kg in September, from 500-540c/kg in October, 480c/kg in November and 480-540c/kg in December.

JBS Australia’s Cobram plant will be closed for maintenance in the first three weeks of August, but will pay 600c/kg for MSA-certified new season crossbred lambs delivered in the week up to August 28. At Cobram in September, the new season crossbred lamb price range is 540-580c/kg, in October this will drop to 500-540c/kg, the November price will be 480c/kg and in December rates will lift to 480-540c/kg.

The JBS Brooklyn plant’s contract price in late November is 480c/kg for crossbred new season lambs, and in December it ranges from 480-540c/kg. The Brooklyn plant will be operating normally during August, September, October and the first three weeks of November, but the forward contract for lambs is not available at the plant during this time due to service kill commitments.

$85m commitment is strong global market signal

JBS southern livestock manager Steve Chapman said once fully executed the forward contracts across the JBS Australia plants from August to December would represent an $85 million commitment to the industry.

“It gives a strong indication of where our global markets are heading.”

He said the MSA requirement would give the company more flexibility with its domestic business. He said the strong producer contract uptake was expected.

“I think the prices are fair and reasonable, it just gives people a bit of an idea of what’s going on and the ability to hedge their bets through that spring supply.

“People say that $110-$120 is a trigger to sell a sucker. It’s easily achievable at the lowest point on this grid, and well and truly achievable at anything above $5,” he said.

“All we are doing is truing up our supply through a major processing period for us and we are giving strong indications of where the job is at.

“Right now it (saleyard price) is well and truly above those levels, but it is going to come back rather sharply when it does,” Mr Chapman said.

“Speaking on behalf of all processors, we are trading in a very non-commercial environment at the moment.”

Mr Chapman said the contracts gave producers marketing options at their cheapest point of production in spring and early summer.

“Particularly through that October, November, December period there is an opportunity across large range of areas to sell lambs out at the cheapest point of production.”

Mr Chapman said the forward contract prices were indicative of the global market levels for export lambs.

“Given that is the case, we really need to show caution on what a restocker does pay for a lamb and $100-plus to me basically spending your margin – you need to be back in that $75-$80 range to get things back into perspective.”

Click here to see remaining available JBS lamb contract kill space.

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