Survey data suggests that we might not see supply follow the historical trend of tightening over the next couple of months according to Mercado analyst, Olivia Agar.
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"For finished lambs, this will put a lid on the price," Ms Agar said.
"For mutton, it will likely hold back the normal trend of price improvements over autumn."
Ms Agar said there was little change in restocker prices this week, but light lambs took a hit, dropping 51c to 537c/kg cwt.
"The cheaper trend for light lambs was evident in all states," she said.
"After falling 36 per cent since early March, Merino lamb prices have recovered some ground, with the national indicator gaining 64c this week or 14pc."
The mutton market also made some gains in Victoria and New South Wales, while a slightly cheaper trend was evident in South Australia, Western Australia, and Tasmania.
Overall, the National Mutton Indicator improved 17c to 324c/kg cwt.
As predicted, sheep and lamb yardings did remain firm this week, although varied quality at markets such as Wagga Wagga impacted buyer activity.
Leann Dax, Market Reporter for MLA said Wagga numbers declined moderately and bidding became erratic as the sale progressed with buyers only paying premium prices for lambs showing good shape and freshness.
"Hot weather had taken a toll on the presentation of a large percentage of stock," Ms Dax said.
"Once again buyers did not operate to capacity across trade and export categories, reporting they had plenty of contract lambs and direct to works on hand."
Prices trends were wide-ranging across trade categories - the mixed quality and buyer participation from both domestic and export buyers was patchy throughout the sale.
Ms Dax reported that well-shaped pens of 22-24kg trade lambs sold from $154 to $185 with the tops of the lambs $3 to $4 dearer.
"Store lamb inquiry increased with buyers paying from $87 to $151/head and heavy export lamb 26 to 30kg gained $5, selling from $195 to $227/head.
"Lambs over 30kg cwt improved $15 making from $224 to $285/head to average 726c/kg cwt.
"It was a mixed offering of sheep."
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MLA said some processors are still working through stock secured in direct contracts with reports of some facilities heavily booked.
This has reduced the sense of urgency for stock in the market, contributing to the easing of prices.
The Trade Lamb Indicator eased 11c week-on-week with some key contributors trading under the national average.
The top contributor to the indicator, Hamilton, traded 43c under the national average.
Slaughter
Sheep and lamb slaughter have been moving in opposite directions.
Sheep slaughter made an increase of 31pc week-on-week, heightening the year-on-year change to nearly 73,000 head.
In contrast, MLA reports lamb slaughter has eased to 343,659 head - 10,000 head below this time last year.
Recent easing in prices has occurred more sharply for the Mutton Indicator than for heavy lambs, which has been able to maintain a relatively stable price comparatively.
Since June 2022, the Mutton Indicator has eased 51pc to 317.14c/kg cwt whereas the Heavy Lamb Indicator has only eased 11pc
Cheaper mutton on the market is allowing processors to purchase more sheep for slaughter, however the Victorian Labour Day public holiday temporarily dampened sheep and lamb slaughter in previous weeks.
Matt Dalgleish, market analyst for ep 3 said the average weekly yarding so far in 2023 sits at around 87,000 head of sheep, compared to the average of 56,000 head over the first quarter of 2022, which highlights that sheep throughput on the east coast is running around 55pc higher than this time last year.
"Indeed, it is the strongest sheep yarding since 2020 and compared to the five-year average trend in throughput volumes the current sheep numbers are about 26pc higher," he said.
"This probably goes a fair way to explaining why mutton pricing has eased and remains in the doldrums.
"Mutton exports are running above the average trend so far in 2023, so demand for the product is robust, but the heavy supply is acting as a bit of a headwind presently."