Lamb price gap widens

Since March, the eastern states light and heavy lamb indicators have moved lower, both now sitting below year-ago levels, as global uncertainty and economic impacts continue to put downwards pressure on prices.

Heavy lamb prices have felt the pressure to a greater extent, moving to the lowest level since May 2018, reported at 606¢/kg carcase weight (cwt) on Wednesday 19 August, back 203¢/kg year-on-year.

Demand for lighter lambs has continued to exceed heavier categories in recent weeks, with processors hoping to avoid surplus product and restocker demand holding up. On Wednesday 19 August, the eastern states light lamb indicator was reported at 655¢/kg cwt, back 120¢/kg year-on-year. Subsequently, the spread between the two indicators is reported at 49¢/kg in favor of light lamb prices this week.

Over the last five years for the month of August, heavy lambs have held a premium to lighter categories. However, in 2020 domestic supply has outstripped demand from overseas markets, supporting lighter lamb categories.

For the week ending 14 August, eastern states lamb yardings totalled 117,600 head, down 19,000 head on year-ago levels. The decline has been led by heightened retention of stock, with improved conditions encouraging producers to increase flock numbers.

Looking ahead, demand uncertainty will continue to contribute to current market trends. However, a lift in yardings over the coming month could create some supply pressure, as the spring lamb crop will likely be met with subdued demand.

© Meat & Livestock Australia Limited, 2020