THE sheep industry may finally be past the post-drought restocking behaviour from sellers as returns for lambs continue to back off in recent weeks.
The Australian sheep sector's strong position has remained steady for some years now but it continues to be volatile, according to ANZ's latest agri commodity report.
ANZ Agribusiness Research head Michael Whitehead said the industry, and particularly sheep prices, continued to be impacted by a range of factors including volatile yarding numbers, disruptions to the processing sector and fluctuating export demand.
"In addition, the regular seasonal impacts, as the industry heads toward a winter of lambing before spring lambs hit the market, also needs to be considered."
Industry benchmark Eastern States Trade Lamb Indicator dropped just below 800 cents in March and in most years, would still be a positive sign.
"That figure is not only 25 percent higher than the same point in 2019, but almost 40pc than the average for the same time over the period of 2015-2019," Mr Whitehead said.
"However, not only has the ESTLI dropped below the same point in time for the previous two years, but it is also now 20 percent down on the record high recorded in February 2020, when the industry was arguably at the start of the sustained restocking period, in the wake of the end of drought."
Looking at this in terms of an annual cycle, a slight decline in lamb prices from January to the end of March is not unusual, having occurred for at least six of the past eight years, according to Mr Whitehead.
He said reasons for this could include an easing in consumer demand for lamb after the summer holidays, as well as processors and retailers having reasonable supplies in storage.
In addition, it could also be as a result of producers having sold off older lambs in that period, in anticipation of having leaner grass availability heading into autumn, with the annual uncertainty of the timing of the break, and subsequent growing conditions, balanced off against the need to buy feed in a market of tighter grain and hay supplies.
Looking longer term, one signal from this price drop may well be that while lamb prices are likely to remain strong, the volatility of the past two years may finally be flattening out, with prices potentially returning to a more even trend, albeit with the regular fluctuations the market always has.
In the report, it showed that in the previous two years, three major factors have impacted prices - the post-drought restocking period, the Covid disruptions to the lamb processing sector, and the volatility in sheep meat exports.
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