Analyst Intel

16 July 2021

PULSE | Good payoff for in-lamb ewes

The North Island in-lamb ewe market has now been running for enough weeks to get a good gauge on this market. And going off the numbers, prices are about where they should be – at record levels.

More than 15,000 mixed-age and four-year, plus SIL ewes, have passed through the Matawhero, Stortford Lodge and Feilding yards since the start of June, where an average price of $200 has been paid. This is $20 more than the previous peak in 2019, and a long way from the days of 2009-2016, where averages ranged from $90-$125 in all but one year.

There’s much less South Island data due to the smaller influence of sale yards. However, the 4000-head Temuka in-lamb ewe fair on July 9 at least met the North Island market, exceeding expectations on some consignments. Older ewes mainly traded at $220-$260 and $240-$270 covered the younger types.

Schedules obviously play a big role in what buyers will pay. Analysis shows the North Island market closely follows a rule of plus-minus $15 for every dollar change in the lamb schedule and plus-minus $20 for the same change on mutton schedules. Using this logic, prices are bang on where they’d be expected to be.

Loosely speaking, these early-lambing lines are usually cashed in on at the start of the following season. We’ll assume a typical line weans at 150%, ewes kill out at 25kgCW and lambs 17kgCW, both in the second half of November. On this basis, a typical margin on this trade in the North Island would be $120-$160, though it has fallen below $100 on the odd occasion.

This maths points to a cautious new season outlook at the farm gate. Or at least good margins on in-lamb ewes. Should the market follow the pattern forecast in the latest AgriHQ Livestock Outlook – mutton at $6.50/kg and lamb $8.50/kg in late November – then $180 would be the return for farmers. Even under a relatively ‘bad’ scenario – taking a dollar out of both prices – this would still leave a healthy margin of $130.

Interestingly, the two-tooth and four-tooth market hasn’t really taken off to the same extent as the older ewes. There is a premium there, but it’s only around $20-$30, which isn’t much different from other years when the base price was much lower. This mostly reflects the more pessimistic longer-term perspective for the sheep industry, or at least the view that this latest round of strong slaughter prices won’t last forever. Though there hasn’t been an abundance of quality lines on the market, at least through the North Island where a number of regions are holding onto these sorts after cutting numbers back last year through the drought.