Tuesday, March 19, 2024

BLOG: $9 lamb price is not a signal

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Everyone, farmers included, likes a bit of extra cash in the back pocket. It’s especially so when you’ve put hours of hard work into making a product or growing an animal.
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You want to realise as much value as possible for that toil. Sheep and beef farmers often have a bit of choice when it comes to realising that value. They can choose when and where to sell their stock to a certain extent.

News last week of a $9/kg lamb contract in the market has certainly grabbed the attention of some farmers, according to our analysts. It’s a limited offer from one processor but we’re already starting to see the flow-on effects of it in the store lamb market. At Stortford Lodge the price for male lambs lifted $15-$20 a head with an anticipation the margin will be there at processors down the track. Lamb prices have been pretty good for some time now but this new enticement is perhaps giving farmers the idea that if some can get $9 now then even more is in the offing later in the season.

It’s hard to blame the processor here. It has a contract to fill and needs to pay to fill it. But with processor margins tight in recent years the industry is probably beginning to sweat a little.

And farmers need to look at the bigger picture rather than the dollar signs right in front of them. Filling the piggybank now is always the preferred option but we’ve seen these crests crash on the beach in the past.

For the industry to sustain itself everyone – farmers and processors – must get a margin that works. History tells us that when prices get unsustainably high the processors suffer and farmers are invariably left to ride out the inevitable trough that follows. Myopia has hurt us in the past. Let’s not let it blur the big picture again.

Bryan Gibson

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