Making More from Sheep Australian Wool Innovation Limited Meat & Livestock Australia
MODULE 3: Market Focused Lamb and Sheepmeat Production
Procedure 3.4
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Background
information

Enterprise management and marketing skills are important to better manage price risk and protect the profit margin of lamb enterprises.

Develop marketing skills that enable sound enterprise planning and business relationships to be established through marketing alliances with processors. Develop the knowledge and skills required to negotiate forward contracts and use risk management tools to better manage market volatility.

At a Glance
Monitor a range of marketing news, reports and forecasts.

pt Use market intelligence to implement a continuous improvement program.

pt Participate in credible learning programs.
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Key decisions, critical actions and benchmarks

Ongoing production and market surveillance is necessary to position the lamb enterprise for the present and future.

  • Aim to build business and enterprise management skills as part of the whole farm business plan.
  • Invest time and financial resources in regular market reports: attend information field days, seminars and courses.
  • Identify reliable sources of market information that suit the nature and structure of your sheepmeat enterprise and farming business.

Market Information:

Having decided on your target market (Procedure 3.1), it is important to be aware of how prices move within that market (price risk) and how the relationship between that market and others changes over time (product risk). There are many sources of market information including rural newspapers, radio, independent market reports, livestock agents, processors, electronic markets, financial institutions and other producers. Producers need to filter the huge amount of information available by asking two basic questions:
1) Is it reliable?
2) Is it relevant to my business?

Over time, the importance of various pieces of market information to an individual business will become apparent. See the signposts section for some sources of market reports.

Seasonality

Sheep and lamb prices exhibit a strong, consistent seasonal pattern that is relatively uniform across Australia. Prices are stronger in winter and weaker in late spring and summer and somewhere in the middle in the autumn. The seasonal lamb price curve is driven largely by lamb supply, with lamb demand remaining relatively steady by comparison. However, variation will occur as a result of local influences. It is important that sheep and lamb producers understand both general and local seasonality to ensure they have a reasonable idea of where price might be headed at the time of sale.

Relationship with the market indicator

Knowing whether your lambs generally trade at a premium or a discount to the market indicator at certain times of the year can help you to know whether the price you are being offered is a reasonable price, and can help you with predicting forward sale prices. Apart from allowing sellers and buyers to ascertain a fair value for individual lines of sheep and lambs, having a good knowledge of price relationships (sometimes called “basis”) in markets can help identify broad categories of stock which are relatively underpriced (cheap) or overpriced (expensive).

Managing Price Risk

Price risks can be mitigated by using risk management tools such as forward contracts to secure aspects of the trade in advance. If forward contracts for sheep or lambs are unavailable, there are other strategies which will successfully decrease the price and seasonal risk.

Spreading the buying and selling over a set period will not only average purchase and sales prices over the buying and selling seasons, it will allow better management of unexpected seasonal events.

Undertake training

Adopt a continuous learning approach to develop lamb and sheepmeat production and marketing skills by undertaking accredited training courses such as those provided by MLA’s EDGEnetwork® and NSW Department of Primary Industries’ PROfarm short courses.

Signposts Signposts

Attend

The MLA EDGEnetwork® program is coordinated nationally and has a range of courses to assist sheep producers. Contact can be made via:

PROfarm is the training program developed by NSW DPI to meet the needs of farmers, primary industries, agribusiness and the community. NSW DPI PROfarm short courses are available by contacting:

Confident Livestock Marketing: Meat and Livestock Australia (MLA) and Ag Concepts (ACU) together have developed the ‘Confident Livestock Marketing’ workshop designed to give the sheep and lamb industry participants an insight into where they might find market information, how to interpret this information, and importantly how to use this information to assist in making lamb and sheep buying and selling decisions.

To register interest for the workshop call MLA on 1800 675 717 and mention the workshop or ask to speak to the Risk Management Program Coordinator.

View

MLA Meat and Livestock Weekly: a weekly guide to livestock sales nationally and events at retail and foodservice in key international markets. Free to MLA members online and via email subscription. Visit: http://www.mla.com.au/Prices-and-markets/Trends-and-analysis/Meat-Livestock-Weekly

MLA web pages: statistics and updates on activities in major international markets for lamb, particularly Japan, Korea and USA. Visit: http://www.mla.com.au/Prices-markets/Overseas-markets

National Livestock Reporting Service (NLRS): weekly livestock markets are reported on the day of sale nationally for major sales. Follow links on the right of the page at: http://www.mla.com.au/nlrs

Commonly used terms in this module

Supply chain  

Term to describe the business units involved in getting lamb and sheep meat to the consumer

GR Measurement

Tissue depth (mm) over the 12th rib, used to estimate fatness

Fat score

Varies from 1 (lean) to 5 (very fat) and is a 5mm grouping of GR

MLA

Meat & Livestock Australia

MSA

Meat Standards Australia, a section of MLA

Sheep CRC

Australian Sheep Industry Cooperative Research Centre

Glycogen

Muscle sugar

pH

A measure of acidity and alkalinity

NLRS

National Livestock Reporting Service

AUSMEAT

The Australian company responsible for establishing and maintaining  National Meat Industry standards

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