Market Morsel: Cheap sheep or dear steer?
Market Morsel
Steer prices have been holding value while trade lamb prices have been under pressure. On a cents per kilo carcass weight basis the national trade steer moved back above 1000 cents into March while the Eastern States Trade Lamb Indicator slipped under 800c/kg cwt.
The cents per kilogram spread between ESTLI to Trade Steer has widened to its largest discount in decades in the last few weeks, moving to 233 c/kg discount as of mid-March.
However, when comparing spreads over time it is often useful to measure the spread in percentage terms rather than in c/kg. This is particularly true when prices have risen so much over time for both lambs and steers. Comparing in percentage terms shows that a 50c discount spread on a 500 cent animal is the same as a 100c discount spread on a 1000 cent animal.
The percentage spread of the ESTLI to Trade Steer has widened to a significant discount of 22.6% as of the middle of March, which is the widest the percentage spread discount has been in decades. Indeed you would have to go back to the 2000 and 2001 seasons to find the last time the percentage spread discount widened to similar levels.
In 2000 the discount spread deteriorated to its widest level at a 55.2% discount spread in August 2000. Either way you look at it discounts of ESTLI to Trade Steer in excess of 20% are pretty rare events and it begs the question are lambs cheap presently, or are steers too dear?
