The Australian industry body Meat and Livestock Australia (MLA) are reporting record high lamb prices for the time of year. Their national ‘trade lamb indicator, which is a price guide for lighter carcase weight lambs is recording an average price of $10.41/kg which is the equivalent of €5.86/kg at current exchange rate. Their national ‘heavy lamb indicator’ which is a price guide for heavy carcases weighing upwards of 30kg is recording a slightly higher price of $10.49/kg or €5.90/kg.

These prices have been achieved before but it is an unusual situation for both these prices and the national ‘light lamb indicator’ price ($9.24/kg or €5.20/kg) to be all at such a level at this stage of the year. Supplies in Australia have been affected of late by severe drought in many parts of the country stifling performance.

MLA also report that in recent years processors have ramped up production capacity on the back of flock rebuilding in the last three years while some processors are also increasing processing activity amid moves to phase out live exports. MLA Senior Market Information Analyst Erin Lukey reports that the average weekly slaughter in 2015 sits at 471,000 head adding that with seasonal supply constraints some processors are now likely to enter an expected winter shutdown period.

Robust demand

Lukey adds that the robust demand is also changing processor purchasing activity with current conditions prompting a broader volume-driven approach as processors look to maintain throughput in contrast to targeted purchasing by weight category.

The US which is Australia’s largest lamb market has a preference for carcases exceeding 30kg carcase weight. However with increased domestic demand and export competition for what are described as mid-weight carcases processors are keen to get their hands on whatever supplies they can.

The recent upward price movement is at odds to a three-year trend where high supplies put pressure on price. Reports indicate that this year’s lamb crop could also be affected by drought conditions which could see selling power remain on the side of farmers and finishers.