We often focus on the parts of the country that are struggling with dry conditions, but there are some key sheep areas that are currently doing OK.
After a slightly wetter than normal May to July, rainfall for August to date is within 25 millimetres of normal for much of south-east South Australia and Victoria.
With soil moisture at good levels, we should see a reasonable start to spring for much of the southern sheep area, and with September rains, it could be a bumper.
With many producers doing some destocking during the long dry summer and autumn, there is now some demand for lambs to take advantage of spring feed.
In saleyards, the Victorian Restocker Lamb Indicator has been falling and is tracking a bit below the Eastern States Trade Lamb Indicator (ESTLI).
Finished lamb prices are expected to head lower which is seeing lower restocker prices come early.
Restocker lamb prices at 760/kg cwt put the liveweight price at 333/kg lwt, which seems a bit light on.
We know store lambs 25-35kgs lwt will cost around $120-160 per head.
The money will be made on the sell price.
Seasonality suggests November and December will be the low for prices for the year, but this isn't always the case.
It's hard to see lamb prices falling too far below last year's levels and as such, our worst case is 600.
The expected price of 700 allows another 12.5pc downside from here, while a good spring and rain in the north could see prices as strong as 750/kg cwt.
What does this mean?
The margins look relatively healthy, even in the worst-case scenario with solid profits available after freight, labour and selling costs are factored in (Table 1).
The key is getting weight onto lambs.
If we bring the sell weight back 5kgs lwt the margin at the low price is a bit thin at $16.9/head.
For those with, or expecting to have grass this spring, these lamb margins need to be weighed up against other uses, such as hay, cattle or different types of sheep.
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