Historically we have modelled fair value for the Eastern States Trade Lamb Indicator (ESTLI). However, MLA have switched their reporting focus to a National Trade Lamb Indicator (NTLI) and we thought it prudent to do the same with our in-house fair value modelling.
This week’s update to MLA sheep industry projections was a good time to recalculate the fair value assessment and overhaul the model to a NTLI version. In 2022 the NTLI reported a price range between 662c/kg cwt to 894c/kg cwt and an average annual level of 779c/kg. The EP3 model had forecast the fair value range to fall between 736c/kg cwt to 949c/kg cwt and an annual average of 843 cents. So from that perspective our fair value model ended up being about 8% too generous to the actual NTLI price outcomes.
For 2023 the EP3 NTLI fair value model predicts a range of 657c/kg to 846c/kg and an annual average level of 751 cents. So far this season the NTLI has averaged a price of 687 cents over the whole year, so the model is still being about 9% too generous based on annual average levels. Or, it suggests that current NTLI pricing (circa 550 c/kg cwt) is quite undervalued, according to the model.
In 2024 the model has pricing easing by around 2%, based on current forecasted inputs*, with a potential range of 645c/kg cwt to 835c/kg cwt.
* – Bear in mind that any changes to current model inputs will impact the fair value ranges and annual average predictions supplied in this article. For example, a move to much drier conditions could see lamb slaughter forecasts increase above current forecasted levels and this would place further price pressure on the modelled outcomes.The EP3 NTLI model aims to predict the fair value level of the NTLI based on a selection of demand and supply factors that have historically exerted an influence on the NTLI. There is no guarantee that this model will continue to be accurate into the future and any individuals considering this model and it’s output in their decision to buy/sell cattle should exercise caution, consider their own individual circumstances and seek advice specific to their personal situation.