2016 lamb indicators strikingly similar to 2015

So far in 2016, the national trade lamb indicator has followed an almost identical pattern with 2015. So much so, in fact, that the lift in prices that occurred this week happened the same week last year.

The national trade lamb indicator increased 18¢ this week, to 519¢/kg cwt.

Interestingly though, while the indicators have followed a similar pattern, there are some very different circumstances in the market environment.

Seasonally, the summer for the southern states was generally better last year, with most regions having ‘average’ to ‘slightly above average’ summer rainfall, while this year, it was more ‘average’ to ‘below average’.

This was reflected in the numbers brought forward for processing, and on the supply side, average weekly eastern states slaughter this year is up 5% year-on-year, at 363,821 head. Higher throughput has been recorded across all states.

On the competitor front, New Zealand lamb production for the season-to-date (October-January) is relatively steady, at 140,000 tonnes cwt, meaning pressure from that region is similar on a volume basis.

Finally, average export unit values for the start of 2016 are 8% lower than what they averaged in January 2015, at $7/kg FOB. Adding to the constraints on the export front is the A$ strengthening this year, versus weakening last year.

Taking all this into account, the influential market factors were generally better last summer. Therefore it is encouraging that the lamb market for the year-to-date has tracked almost identically to 2015. Why? It is perhaps a reflection of the expectation of slightly tighter availability going through the winter months and that the A$ has only recently strengthened – albeit to levels still lower than this time last year.

During autumn 2015, the national trade lamb indicator increased from 500¢/kg cwt to 585¢/kg cwt, and maintained that level throughout winter. Considering the aforementioned market conditions, any upward autumn trends may be constrained this year, and it is likely that autumn will actually be a test of market resilience.