Rain may dampen supply but wether outlook remains strong

While it may seem that Merino wether and ewe lambs may not have captured the same attention as crossbred and shedding breeds in 2021, demand for quality Merino lambs from both restockers and processors has remained robust throughout the year.

With the constant murmurings (largely from the more meat focused breeds) that wool production and Merinos have become “outdated”, “old-school” or “too much work”, figures show that Merino lamb purchases continue to provide a fantastic opportunity to generate healthy returns.

The large volumes of Merino wether lambs offered online in 2021 (see Figure 1) illustrates the ample supply available to the market, along with the volume of Merino ewe lambs which producers are retaining as they continue to build flocks. Despite record offerings of new season lambs hitting the AuctionsPlus platform in October, the average prices remained robust - particularly across Merino wether lambs, compared to the historical market decline normally witnessed in Spring.

As “grass fever” continues to inspire restocker purchases across the eastern states, purchasing unshorn Merino lambs provides an opportunity for producers to increase their profit margins and return on investment. This is especially the case with the strong framed fine wool Merino wethers, as they can be shorn and grown out. As for any investment however, the risks must also be identified – in particular, will the current lamb market hold its’ form into 2022 and can shearers be locked in?

So far in 2021, the proportion of unshorn Merino wether lambs offered on AuctionsPlus has increased significantly compared to the previous five-year average (2016-2020). For 2021, 60% of Merino wether lambs listed online have been unshorn, which is a considerable rise from the five-year average of 46%. This is indicative of just how different the current season is compared to previous years and the labour and market factors influencing vendors decisions.

Encouraging widespread seasonal conditions and high prices have lured many producers to sell their lambs early - especially across key lamb growing regions in South Australia and Victoria, which flushed new season lambs 4-6 weeks earlier than usual. On the other hand, the headwinds which also influence the proportion of shorn/unshorn lambs on the market have included the recent heavy rain and limited sunny days which has slowed lamb growth rates. Additionally, and possibly the largest factor, has been the well-publicized shortage of shearers across the southern states, which has given producers in many cases little option but to sell unshorn lambs. Building on this, growing demand and premiums for finer micron wool this year is evident amongst online listings, where the average micron of unshorn Merinos is 19.5 μm, while shorn wether lambs average 17.5 μm.

Considering the flock rebuild and the widespread positive seasonal conditions significantly improving the lambing numbers for 2021, the proportion of unshorn wether lamb listings on AuctionsPlus is well above the five-year average. Looking to the past three months as outlined in Table 1, August, September, and October have seen unshorn wether lamb listings increase by 39%, 30% and 18%, respectively, compared to the 2016-2020 monthly average.

Looking at the price comparison of shorn and unshorn Merino wether lambs in 2021, compared to the previous five years, the price differential normally expanded in the winter months, then narrows in late spring (see Figure 2). For 2021, the price gap between shorn and unshorn Merino wethers narrowed, particularly in the first half of the year (see Figure 3). On average, a 44c/kg premium was attained for unshorn wethers over shorn in 2021, which is slightly higher than 2016-2020 which averaged a 36c/kg premium - however overall c/kg prices are also considerably higher in 2021.