RECENT interstate trade and Western Australian sheep and lambs has sparked renewed concern about the disparity in prices between WA and the eastern states.
Tens of thousands Merino ewes and crossbred lambs have been trucked from Western Australia in recent months by eastern states breeders faced with extreme replacement ewe prices and lamb feedlotters unable to restock at a viable price due to restrictions in saleyard supplies caused by wet weather and flooding.
Agents said from about August to early October there was significant South Australian and Victorian feedlot demand for large lines of new season crossbred lambs at 200-230c/kg liveweight for 30-36kg-plus lambs, with freight about $5.20/km for a B-double. Large lines of WA Merino ewes have been landed in South Australia and Victoria for up to $20 cheaper than comparable local ewes, including about 15,000 into the Wycheproof area alone, but the price gap had closed as WA demand for ewes increased in October.
WAFarmers last week said WA sheep and lamb producers were becoming increasingly disappointed with the constant price disparity paid by meat processors in the west and east for mutton, lamb and skins.
WAFarmers Livestock Section president John Wallace said since 2003, the WA Trade Lamb Indicator has averaged a 37c/kg carcase weight discount to the Eastern States Trade Lamb Indicator. The farmers federation has challenged WA-based meat processors to explain why this “discounting” occurs, claiming that over the last 10 years, lamb prices in the west have been, in general, lower than in the east.
No competition issues in WA sheep and lamb trade – Murray
Sheepmeat Council of Australia president Jeff Murray said increased sales of Western Australian sheep and lamb to the eastern states were a threat to the viability of the WA industry. He supported the WAFarmers’ call for a solution to the disparity in sheep and lamb prices between WA and the eastern states, but said as long as the live export demand was strong. Mr Murray did not believe the WA industry had competition issues.
“Our sheep numbers over here are dropping back slightly or flat at best and if we are to get the sheep that we need to fill the markets around the world we certainly need to have the sheep in the business that we can get.
“While our prices drop behind eastern states prices, it makes it difficult to compete.”
WAFarmers blames fewer buyers and less competition
Mr Wallace said WA producers did not understand why western processors are constantly discounting lamb, mutton and skins produced in the west when there is no difference in qualities.
“The only thing we can think of is that while lamb from both the east and west ends up in export markets, perhaps the smaller WA slaughter means fewer buyers and less competition in markets.”
Mr Wallace said WAFarmers would like to hold discussions with the whole of the sheep trade to get a holistic view of the industry and pricing. This would include processors, feeders and exporters.
“The lower prices for lamb, mutton and skin prices are sending out all the wrong messages to sheep producers,” he said.
“Many producers are choosing to take advantage of the higher prices offered by eastern state processors and lamb finishers,” he said.
“It also has implications for lamb and mutton processors in WA who needs this supply to balance their bottom lines with all year round supplies.”
Mr Wallace said WAFarmers had not put forward formal questions to processors; however, some of our representatives have approached WA buyers with these queries about the prices they are paying in their capacity as independent sheep producers.
“WAFarmers wants to generate open and cooperative discussion on this issue to learn why there are such price disparities and to determine a long term solution that would result in a fairer price for WA sheep producers.
“Making people aware of this issue is the first step in a collaborative process which is focused on securing a fair and sustainable price for WA sheep producers, which will help to keep sheep in WA.”
Lower WA prices are ‘short-sighted’
Mr Wallace said the decision by WA processors to pay a lower price for WA lamb, mutton and sheep skins was a short-sighted option that will hurt traders in the long term.
“Not only does it discourage people from entering the industry, but there is a good chance supply will tighten up as more sheep go east, particularly in the latter part of the year, and this will push prices higher.
“WAFarmers is open to any suggestions as to how we, as an industry, can ensure a fair long term price for WA lamb, mutton and skins, and we recognise that this could include an inquiry into skin values if this is what industry would like,” he said.
“Were this inquiry to occur, the aim could be to lift WA skin prices to a consistent price of approximately $8-10 for a 22 kilogram lamb, which would be on par with what eastern states sheep producers are getting.”
Mr Wallace said some of the forward contracts being offered by WA processors for mutton and lamb for January 2017 are not attractive and will not encourage sheep producers to take up the contracts, as most producers will pursue the higher prices being offered by eastern interests.