SA's new-season lamb producers will sit tight in anticipation of a price correction in the coming weeks, as the effect of reduced global demand and capacity at Vic processors begins to take a toll on lamb prices.
Despite some recent price stabilisation, falling prices in the past few weeks have cemented an unprecedented time for the state's sheep and lamb market.
Lamb producers and processors are desperate to gain market certainty.
Thomas Foods International national livestock manager Paul Leonard said with the looming threat of extended restrictions on Vic processors, unexpected "forward positions" to secure lambs were being taken.
TFI's Lobethal facility has secured 70 per cent of its new-season lamb kill space at about $6 a kilogram for sucker lambs, $5.70/kg for crossbreds in September and early October, while later in October/November and December, $5.70-$5.80/kg has been offered.
"For most of our producers, kill space has been their top priority, not price, to take out the potential uncertainty of not having a buyer in the coming months," he said.
"The risk across the entire supply chain is high and we have certainly taken one of the most forward positions than we ever have in the past. But producers and TFI were happy to lock forward and we are comfortable with our position, even if lamb prices fall to below what we have already offered."
But Mr Leonard assured non-contracted producers that TFI would remain active at saleyards during the peak lamb selling season.
"We will definitely be procuring stock from the South East to supply the Tamworth, NSW, facility," he said.
Also front of mind for producers was a potential bottleneck of lamb supply.
Ceduna lamb producer Brian Durdin said those holding lambs back in the hope of a price rise were "playing a game" they might not win.
"Prices could just keep dropping and if Vic processors do not get back to full production and everyone is holding lambs back to get a better price and put more weight on them, it could mean there will be too many lambs for the market to handle in late October/November," he said.
"It could be a gamble, but I am going to hold my lambs back for a few more weeks to see what the prices do and if I have to shear the lambs and hang onto them to get more money, then I will."
Generally, Mr Durdin locks in about 400 lambs to TFI, but this year it is less, despite his concerns that saleyard prices could fall further.
"If processors back off in the coming weeks, it could spell trouble, but we have done our best to avoid low prices," he said.
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UNCERTAINTY AHEAD BUT HOPE PREVAILS
A POTENTIAL influx of new-season lambs into the state's saleyards in the coming weeks has the sector bracing for lower returns, but livestock agents are still hopeful that despite the change in selling behaviour this year, it will not dramatically affect lamb prices.
Elders Dublin/Yorke Peninsula livestock manager Matt Ward said up until the past few weeks, the interstate processing sector situation had not impacted SA lamb prices.
But when a flush of lambs arrive in less than a month, "it could spell trouble" for producers.
"When Australian Lamb Company shut down at Colac, Vic, it caused big concerns, but producers changed their selling behaviour and locked in a lot of kill space instead," he said.
SA Livestock Exchange head auctioneer Glenn Keast echoed this, but said further uncertainty had also been caused by the export lamb market collapse.
"It will apply more pressure on prices because the greater number of lambs that will be redirected domestically in the coming months," he said.
Although the South East's peak selling season is yet to arrive, Pinkerton Palm Hamlyn & Steen livestock agent Simon Mulraney said there were fewer lambs moving in and out of the Naracoorte saleyard than this time last year.
"Despite the lamb job lifting in the past three weeks, SA producers are choosing to hold onto lambs because of uncertainty," he said.
"If Vic processors return to full production in three weeks, the system will handle it, but if restrictions are extended, instead of having 4000 lambs at Naracoorte, there will be 34,000 and will cause quite the jam."
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