Lamb producers have opportunities this spring and summer to leverage excess paddock feed into kilograms of meat to optimise returns in a difficult market.
On the back of an excellent season in 2020 in many areas of Australia - especially along parts of the east coast - it could be worth considering holding stock back from sale during the traditional annual 'flush' of supply.
These lambs could then be grass fed in paddocks with an abundance of feed - at minimal cost - for another two or three months to increase carcase weights by up to five or six kilograms.
Producers who have experienced prolonged drought conditions and de-stocked in recent years, but now have high paddock feed availability, may also be able to capitalise on some strategic stock trading.
This could involve buying-in lambs, feeding on pastures and then 'cashing-in' on the weight gain several months later.
Another strategy could be selling older cull ewes and buying-in younger ewe lambs for future breeding at a similar price, as part of longer-term business planning.
Having high levels of paddock feed provides flexible marketing opportunities for commercial lamb producers, breeders and backgrounders this spring and into the summer months.
StockCo business development manager Chris Howie said even if lamb prices did not improve between September this year and January 2021, any weight improvements from grass feeding lambs during that period would translate to extra money in the bank.
"Having high levels of paddock feed provides flexible marketing opportunities for commercial lamb producers, breeders and backgrounders this spring and into the summer months," he said.
"It is about generating cashflow by producing more saleable weight in the paddock at a very low cost, or setting up livestock systems using younger ewes to lift future profits."
StockCo provides financing options to help underpin these types of livestock marketing and management options.
Mr Howie said now was an ideal time for livestock producers in all states of Australia to consider their marketing strategies in a different way.
"For example, you could sell a lamb straight from its mum in spring at 20 kilograms dressed weight, or hold it over for grazing until it reaches a dressed weight of 25kg during spring and into early summer - thereby cashing-in on those extra 5kg of meat produced from your pasture base," he said.
"If prices don't shift a lot in that time, you will get a higher overall return from the extra weight gain or - if buying young ewes - the lifetime maternal potential.
"The benefits are there, even when factoring-in a small cost for financing and grass feeding."
Mr Howie said these tactics were attractive in the current market, where prices had dropped by $3-$6/kg from pre-COVID-19 expectations for new season lambs - compared to those being delivered under contracts negotiated two months ago.
He said lamb supplies were traditionally high at this time of year following traditional autumn lambing programs and increased production of meat sheep generally in Australia.
"And supplies are likely to continue increasing as southern Australia heads into the traditional spring flush of turn-off at lamb weaning," he said.
But demand for lambs is under unusual pressure this year on the back of: COVID-19-induced slaughter interruptions at major meat processors on the east coast; lower exports in the wake of COVID-19 restrictions impacting on consumer spending and hospitality industry demand; and subdued domestic demand, also related to pandemic controls that mean fewer people are travelling and dining-out.
"We are expecting lambs to be trading in the $5.50 to $6.20/kg range (based on east coast prices) for the next couple of months, which is a big drop from pre-pandemic budgeted expectations of about $7 to $10/kg," Mr Howie said.
"The upside is that there is good availability of paddock feed to finish lambs at a very low cost and potentially gain up to $30-$40 from weight gains without any increase in processor pricing.
"And there is potential for even higher profits if the market does improve."
Mr Howie said StockCo had been providing finance for Australian and New Zealand commercial cattle and sheep producers, breeders and backgrounders since 1995 to help them take advantage of these types of marketing strategies.
He said the company's livestock finance was designed to fund 100 per cent of the purchase invoice of the livestock - which StockCo, therefore, had direct security over. There is no interference with existing bank arrangements.
"Subject to StockCo's eligibility criteria, we can also underpin budgeted financial needs of producers by releasing equity in livestock," he said.
"We do this by providing a cash advance against animals they already own, allowing them to meet bank repayments, capital or plant improvements.
"We understand the complexities and challenges of operating an agribusiness enterprise in a wide range of environments and seasonal variations - and our strategic agri-finance cashflow and capital management services are targeted at grower needs at a very regional level.
"Using StockCo's facilities, livestock producers can optimise returns from their existing operations and embrace new business possibilities.
"There are opportunities for producers to really push the envelope and progress their business."
Mr Howie said StockCo had an extensive network of distribution partners and representatives based in regional centres across Australia's livestock producing regions.
This was key to ensuring quality local service for clients.