Market Morsel: Let the gains begin
The Eastern States Trade Lamb Indicator (ESTLI) has performed in a relatively lacklustre fashion since the start of 2022 with the seasonal percentage price gain/loss chart showing the indicator has declined around 10% since the beginning of the year. The softening trend has been in line with the lower boundary of what could be considered normal for seasons that experience price declines during the start of the year. The grey shaded 70% range denotes the boundary of ESTLI gains/losses that would be considered relatively normal, based on historic price variations.
The average pattern (dotted line) demonstrates that it is more common to see the ESTLI gain marginally early in the year and then consolidate sideways through March to May. As lamb numbers begin to tighten towards winter the ESTLI usually starts to climb higher, often peaking in late winter.
A selection of recent seasons ESTLI price gain/loss pattern, for 2016, 2018 and 2019, highlights that they all started the year in a relatively lacklustre manner akin to the 2022 pattern, with the 2018 trend a particularly close representation of this year’s trend so far. Both 2016 and 2018 saw the winter price gains begin in mid/late April, while 2019 saw the price lift a few weeks earlier. Despite the poor start to the season, 2018 saw the ESTLI turn from a 14% loss to a 32% gain from autumn to winter. A similar magnitude recovery in the ESTLI this year would place the winter peak beyond 1100c/kg cwt, which seems unlikely.
However, a price recovery of 10% to 15% of the 2022 starting price isn’t out of the question, which could put the winter peak between 940-980c/kg cwt in 2022.