A rising tide lifts all goats

The Detail

Last November we took a look at over-the-hooks (OTH) goat pricing in relation to the Eastern States Trade Lamb Indicator (ESTLI), using the ESTLI fair value modelling to estimate likely goat annual average prices for the 2021 and 2022 season. The modelling back in November 2020 assessed two scenarios for goat prices based on a slower recovery from Covid-19 or a quicker global turn around in the economic slump caused by Covid-19.

The 2021 OTH goat forecast was estimated to fall between 800-900c/kg cwt, depending upon the pace of the Covid-19 recovery. As it turned out the annual average OTH goat price for 2021 has come in around 842c/kg cwt (as at early December 2021), so our forecast range wasn’t too far off the actual outcome for the season. In the last five-years OTH goat prices have mirrored the ESTLI annual average and the broad trend in price movements have been fairly similar back to the early 2000s, so we have been using the strong relationship between OTH goat prices and the ESTLI fair value modelling outcomes to estimate the likely outcome for annual average OTH goat pricing.

Last week we updated the EP3 modelling for ESTLI fair value to 2023, based on the updated metrics that are used by the modelling tool.  A keen subscriber noted the update to the ESTLI forecasts and requested we take another look at OTH goats to provide estimates of the annual average pricing out to 2023. As the scatter plot highlights there is a very strong correlation between the annual average ESTLI and the annual average OTH goat price with a coefficient of 0.8972. This means we can be fairly confident when using the ESTLI modelling tool to estimate OTH goat pricing, in the absence of a specific forecast model for Australia goat pricing.

We have provided three possible scenarios for goat pricing to 2023, taking a look at weak, moderate and strong potential pricing outcomes. For the 2022 season the modelling suggest that under a weak scenario OTH goat pricing is likely to average 736c/kg cwt. A moderate pricing scenario lifts the annual average forecast to 818 c/kg cwt, meanwhile a strong pricing environment will see it average 900 c/kg cwt.

Continued growth in global demand for sheep and goat meat against a backdrop of limited supply will see prices continue to climb according to the modelling, such that by 2023 it is estimated that the OTH goat price will average 773 c/kg cwt under a weak scenario, 859 c/kg on a moderate assessment and as high as 945 c/kg cwt on under a strong pricing environment.