Prices
The following table shows for seven main sheep industry indicators; their average during June 2015, the percentile[1] for that June value, and the first and third quartile[2] values for the last ten years. Overall, sheep industry prices finished 2014/15 in a strong position with all the listed indicators except saleyard mutton above the third quartile, that is the June 2015 value was higher than it was in three quarters of the months of the last ten years.
The heavy lamb over-the-hooks indicator and Western Market Indicator for wool have each finished 2014/15 in a very strong position with percentiles of 95 and 98 respectively. The mutton indicators, while still above the average for the last ten years, remain below the highs achieved during 2011 and the first half of 2012.
| Indicator | June 2015 average | Percentile | 1st quartile | 3rd quartile |
|---|---|---|---|---|
| Heavy lamb (over-the-hooks) | 560 | 95 | 332 | 481 |
| Heavy lamb (sale yard ) | 524 | 89 | 306 | 478 |
| Mutton (over-the-hooks) | 285 | 79 | 120 | 270 |
| Mutton (sale yard) | 257 | 63 | 141 | 303 |
| Export wether quotation | 99 | 78 | 59 | 98 |
| AWEX Western Market Indicator | 1358 | 98 | 831 | 1113 |
| AWEX 19 micron price guide | 1367 | 86 | 1016 | 1248 |
Heavy lamb indicator
Both heavy lamb indicators show a marked seasonal pattern with prices higher than the annual average during June and July, and lower than average between September and December (Figure 2). The saleyard indicator tends to be higher than the over-the-hooks indicator when prices are high (June, July) and lower when prices are below average (September through December).
In 2014/15, the over-the-hooks and saleyard heavy lamb indicators averaged 65-70 cents higher than they averaged in 2013/14. While variable within and between years, there continues to be a generally upward trend in lamb prices.
Mutton indicator
The seasonality of the over the hooks mutton price is less pronounced than that of the saleyard price. Over the last ten years, the over the hooks indicator has been statistically a little higher in June and a little lower in November than the annual average. The saleyard indicator while also higher than average in June, tends to be below average in the four months September through December. However, this seasonality of the indicators does not mean that the saleyard indicator is lower than the over the hooks indicator in those low months. Figure 3 clearly shows this is not always, or even often, the case.
In 2014/15, the saleyard mutton indicator averaged 295 cents while the over the hooks indicator averaged 271 cents/kg carcase weight. Both indicators were around 60 cents higher than they were in 2013/14. Mutton prices over the last ten years have trended upwards, though with very large swings between years. While not at the stellar level seen in 2011, 2014/15 prices are on trend and above the late 2012 and 2013 levels.
Live export quotation
Live export wether quotations are reported by MLA’s National Livestock Reporting Service (Figure 4). They follow a seasonal pattern similar to that reported for mutton. Prices tend to be above the annual average in May and June, and below in September through January with the largest discounts in October and November.
In 2014/15, the wether price averaged $91 per head, an increase of $12 per head on 2013/14. While the wether quotation in 2014/15 is above the ten year average, it remains below the highs reported in 2011 and early 2012, and a little below the trend line.
Wool price
In the space of five months between September 2014 and January 2015, the Australian dollar has devalued significantly against the US dollar falling from over 90 cents to below the 80 cent mark. This is beneficial for the majority of Australian agricultural products due to the heavy reliance on global markets, as the lower Australian dollar makes them more competitive in overseas markets. For wool, this is especially important as Western Australia in effect exports 100% of its clip.
Figure 5 demonstrates this using the Western Market Indicator (WMI). The blue solid line representing the WMI in Australian cents has been increasing over the last 12 months; however prior to April 2015, the WMI in US cents (red dashed line), has been decreasing, making wool more affordable in markets that trade in US dollars. Since April 2015, the rising price has more than compensated for the lower Australian dollar.
These high prices are partly attributed to increased demand brought about by a more relaxed lending and credit atmosphere in China, and partly due to reduced supply due to lower sheep numbers in producing countries.
In 2014/15, the WMI averaged 1132 cents (Australian) per kg clean, an increase of 34 cents on the 2013/14 average. Prices tend to be lower than the annual average between July and October. Wool sourced by processors during this time of the year is mostly delivered too late to be used for the northern hemisphere autumn/winter retail season.
The 19 micron price guide and the Western Market Indicator continued to follow very similar paths during the 2014/15 financial year (Figure 6). The premium for 19 micron wool relative to the WMI remains low at around 8% relative to earlier years when it has been closer to 20%.
[1] Percentiles report the proportion of a list of measurements that are at or below a specific value. The percentiles presented in this report indicate the proportion of months over the ten years to June 2015 when the average monthly price was less than or equal to the current price. For example, 90th percentile indicates the price that is higher than the price in 90% of months.
[2] The first and third quartile values are the 25th and 75th percentile respectively.