THE mutton market is set to propel to new heights this year as strong wool and lamb prices put a squeeze on cast-for-age ewe numbers.
Mutton prices have rallied to six-year highs with a dramatic 145 cent a kilogram carcase weight climb on year-ago levels, the upshot of tight supply and solid demand.
“The sheep industry has started to light up,” Elders southern livestock manager Ron Rutledge said.
“The sheep market has gone from third gear to fourth gear in the past two weeks.”
While the national mutton indicator dipped 28c/kg cwt to close last week at 379c/kg, prices remain buoyed across the country with the eastern states indicator just shy of 400c/kg on Tuesday.
Stimulated by scarce sheep numbers, the strong meat market and record wool prices, Mr Rutledge said this year’s price gains had only just begun.
“Restocker demand has really intensified - it is the true ‘stock market’ with a demand verse supply battle,” he said.
“The market is being shown the clear results of the five year cycle of dry conditions when flock numbers were hit hard.”
Mr Rutledge said Merino ewes which received $200 to $215/head in spring had since cut a further $7/month of wool, further supplementing the estimated $45/head jump on year-ago prices.
“We’re going to see it go up another gear by autumn,” he said.
“Talking to scanners and the results are clearly evident that the flock hasn’t grown at all, despite commentators and processors saying there will be an overload of stock.
“Early scanning in the Riverina indicates Merino ewes at 70-80 per cent in lamb so we won’t see any more numbers than last year.”
His commentary played out at the Deniliquin, NSW, recent special store sheep sale, where about 35,000 head averaged $152 for a near $5 million gross.
“Processors are struggling to compete with restocker prices,” he said.
“Deniliquin was a case in point - I don’t think a processor bought an animal.”
Meat and Livestock Australia market reporter Leann Dax said the severe drought in parts of NSW, Victoria and SA last year forced producers to offload an increased number of aged ewes.
“Prices are being spurred by the shear lack of numbers,” Ms Dax said.
“Because lambs have been making a premium recently, producers are also holding onto their aged ewes to try and get one more lamb out of them so they’ve become very scarce on the ground.
“This year, merino ewes scanned in lamb have made $212, last year they were lucky to make $150.”
Livestock agent Peter Prosser of Prosser Hutton, Mungindi, Queensland, said the extreme ewe prices had forced central Queensland producers to opt for wethers.
“It comes down to a risk assessment - it is a lot lower risk to buy an $80/hd wether than a $150/hd ewe, even though the ewe could make a lot more money,” Mr Prosser said.
“A lot of the producers around Longreach would like to buy ewes but it is big money to send them back up there.”
This month, Mr Prosser facilitated the online sale of 5.5 to 6.5 year-old sound mouthed ewes which sold from $150-$192/head, bound for Guyra, Henty and Dubbo, NSW.
“Our guys are saying ‘sell, sell, sell’ - why would you hang on?” he said.
“The last time prices were at these levels was about five years ago – the sheep guys are making really good money.
“Central Queensland used to be the drawing card for sheep but the numbers aren’t there anymore so unless those numbers are replenished in breeding stock, this market has got to continue.”
While mutton values had hit resistance levels which had been in place for six years, Mecardo market analyst Angus Brown said there were good indications this resistance could be broken.
“The rise in the Eastern States Trade Lamb Indicator, if it is sustained, should give mutton values further impetus if supply tightens, which it usually does in autumn," Mr Brown said.
“This initial target for rising mutton prices is 450c/kg cwt, with a new record of 500c not out of the question.”
Despite the higher prices over the last year, exports to Middle East had been maintained.
“The Middle East seems to out-compete Asian markets, which had larger imports when supply was more abundant, and prices cheaper,” Mr Brown said.
For those importing mutton, he said the market had been more expensive in the past with the National Merino Indicator 25pc below the 2011 highs in USc/kg cwt terms.
“This suggests that there might be some room for mutton prices to move higher in US terms if supply tightens further, from the already relatively tight levels,” he said.