Wednesday, April 24, 2024

Are store lambs still good buying?

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A lack of feed has meant the demand for store lambs is almost non-existent, but bargains remain for those who can carry stock through winter.
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As the days become shorter, the supply of lambs entering the store market continues to expand. Unfortunately, demand for lambs in recent weeks has been close to non-existent and the push for store lambs to hold their value has diminished, despite a relentless battle by vendors.

The changing season marks the time of year to assess feed capacity and start offloading in accordance with winter stocking rates. The influx of store lambs to market is always expected to cause some price downside. However, last year things played out a little differently and store lambs had been holding strong relative to schedule.

This time last year the country was flush with feed. Cooler temperatures had slowed growth but there was an apparent lack of any sign of drought across North Island regions. While the market twelve months ago may have been oversupplied with lambs, there was enough demand to absorb the seasonal increase as buyers banked on a strong winter return. As a result, heavy store male lambs had been steady through the opening months of 2023, trading at $3.40/kg in the North Island, or around 47-48% of schedule.

This year, autumn dryness is prevailing across much of the North Island, the exception being parts of the King Country and Waikato that still seem comfortable with feed. 

On the west coast of Northland, most of Wairarapa and Wellington, the weather has been very dry and most farmers are short of feed. Last week 32kg male lambs quoted at $2.50/kg ceased to generate any interest, causing further downside to a new level of $2.45/kg. This week’s AgriHQ lamb price indicator of $6.10/kg would put these lambs at 40% of schedule. In a year of autumn drought, this kind of percentage is to be expected. The last time areas in the North Island experienced this kind of autumn, the country was in lockdown, making it hard to compare the outlook. However, as a reference to this time in 2020, 32kg male lambs were trading for $2.80/kg against a lamb slaughter price of $7/kg, equating to around 40% of the schedule.

This time last year slaughter schedules for lamb were lifting in both islands, and buyer confidence was well supported by the expectations of active Chinese demand as they emerged from lockdown. Prior to last year the average lift in farmgate prices between May and September was $1.10-$1.15/kg. 

Last year farmgate prices fell from autumn to spring – a first in 11 years, as China demand recoiled. This year export demand from China has flatlined with little expectation of any lift in demand or price in the short-term. However, not all is lost with our traditional markets stepping up to the plate, providing a glimpse of optimism.

Last year the steady appetite for store lambs and an expected firm outlook on slaughter returns kept prices for lamb on the stronger side. The catch to the dynamic was the difficulty of sourcing a good deal on a line of “cheap” store lambs. On the Thursday before Easter in Feilding last year, 2500 lambs weighing on average 35.5kg were auctioned at an average price of $3.42/kg. Similarly, at Stortford Lodge, there were over 5000 lambs yarded. Overall, lambs averaged $3.41/kg at an average weight of 36kg. Last week yard activity was close to zero. Feilding cancelled at late notice, while Stortford Lodge sold only 900 lambs with 30-40kg males returning $2.36-$2.53/kg. 

In stark contrast to last year, the window of opportunity is seemingly open for winter traders to generate a margin – if they have the means to hold lambs over winter. 

Hence the period of weakness to this market while most of the North Island waits for more rain. The forecast for slaughter price is for there to be some upside but at this point it’s nearer the lower end of historical levels, sitting just shy of $1/kg to September. This would make current 32kg male lambs at $2.45/kg relatively good buying based on a firming slaughter market in the months ahead.

This article was written by AgriHQ analyst Alex Coddington. Subscribe to AgriHQ reports here.

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