Prices will rebound: WAMMCO

Melissa WilliamsCountryman
The West logo

WAMMCO has predicted farm gate lamb prices could fall slightly before rebounding in the second quarter of next year.

The grower co-operative held its 13th annual meeting in Beverley last week, where it reported an $885,000 pre-tax loss for 2011-12 and told producer shareholders there would be no pool distribution this year.

As previously reported in _Countryman _, during the past financial year WAMMCO had a turnover of $209 million for its combined Katanning and Goulburn facilities.

Turnover at the Katanning plant was $108 million, down from $124 million in 2010-11 when it posted a $3 million profit.

In 2011-2012, WAMMCO paid lamb producers an average of $114 per head - slightly down from $117/head the previous year but up from average returns of $98.89/head in 2009-10.

WAMMCO chief executive Coll MacRury last week blamed the group's 2011-12 financial loss on six months of tough trading conditions in the processing sector, but said the result could have been a lot worse.

"It is not a huge loss and we will work to turn it around for next year by tightening up operations at both our Goulburn and Katanning plants and focusing on value-adding," he said.

"The aim is to pay growers as much as we can and we can do this by targeting high value markets."

WAMMCO chairman Dawson Bradford said there were no immediate signs for recovery in a global lamb market that was awash with product.

He told ABC Radio this week it was hard to tell if the global lamb market was bottoming-out and there might be room for further price downside before lamb values rebounded.

Mr Bradford said live export turmoil was a significant factor and a lot of damage had been done with the recent turmoil.

He said WAMMCO was currently paying about $3.70/kg for its main lamb lines at Katanning, but this might need to contract slightly as the co-operative sought more markets that would provide the best returns for producers.

Mr MacRury said the Katanning plant was solidly booked through to February 2013 but had underwritten supply contracts at a minimum $4/kg for top lambs from April to June next year.

"This is an attempt to make sure we have lambs to process during that quarter and we have had good feedback from lamb producers for taking this step," he said.

"We want to encourage WA producers to proceed with their sheep mating programs.

"WAMMCO will be ready to meet new market demand from countries such as Canada and India, as well as any resurgence in demand from existing markets."

Mr MacRury said global demand continued to be lacklustre and key Australian lamb destinations in Europe, the UK and the US had been particularly hard hit.

He said economic problems in these markets had coincided with high Australian lamb prices last year on the back of an acute sheep shortage.

Mr MacRury said the price correction this spring should make lamb more affordable and spur an increase in demand offshore.

"Lower prices since January should begin to tempt consumers in our main markets to start buying lamb again," he said.

"And we are starting to head into the northern hemisphere winter when we typically see an increase in demand for lamb.

"It won't be a quick rebound, but a slow turnaround.

"There is still a bit of frozen stock to move, but once demand starts to pick up, we should see some price increases.

"This may take seven to eight months to achieve."

Mr MacRury said oversupply from New Zealand and the eastern states was expected to continue into January and February but heavy lambs from the east were expected to be over-fat and WA's product was now superior.

He said WAMMCO would use more value adding techniques for heavier WA lambs that had a tendency to get too expensive, mainly to leg cuts, to attempt to maximise producer returns.

"We are striving to get smarter and this season we are breaking down some cuts to smaller portions to make them more attractive to buyers," he said.

WAMMCO has also encouraged its shareholder producers to exclusively sell through the co-operative to boost its supply and allow the Katanning plant to operate five days per week.

Currently only 20 per cent of shareholders do so.

Producer director *

_At last week's WAMMCO annual meeting _ Gerard O'Brien - formerly an independent director - was voted on as a producer director.

Get the latest news from in your inbox.

Sign up for our emails