SUPPLY fears have driven Australia's largest sheep exporter to offer forward contracts of $100 a head for sheep delivered in February next year.
West Australian live exporter Wellard Rural Exports has released forward price contracts in an attempt to secure supply into their vital Middle East markets.
The contract is $20 better than what Wellard's offered for heavy sheep - 56kg-plus live - last year.
However, $100 is a floor price, and if the spot price is higher at the time of shipping, the producer can choose which price to take.
Wellard's Middle East livestock manager Garry Robinson said: "What we are trying to do is shore up some supply options".
"We are coming into a difficult time of year now, and the opportunity is there to (lock in the forward contracts)."
The well-documented decline in the Australian sheep flock, has led to a decline in exports to the Middle East. Exports have shrunk 11 per cent during the past 12 months to March, according to Meat and Livestock Australia.
The Wellard's forward contract comes after average prices for wethers destined for live export into the Middle East hit a record average price of $98.60 in April.
According to the MLA's Sheep Industry overview released last week this was a rise of 9 per cent compared to March and a lift of 14 per cent compared to April last year.
However, with sheep prices at Bendigo on Monday maintaining solid rates - 24kg-plus wethers averaged $108 with the best price $140 - some producers will be locked out of the market, or tempted to sell wethers now.
Elders Hamilton's Andrew Gunn said Wellard's forward contract would give producers gonfidence.
"None of us have a crystal ball about where prices are going, but it is great to have an incentive for producers," he said.
"I don't think we are going to see a drop-off in prices.
"I think prices will remain firm ... as sheep numbers are just not about."
"I like forward contracts, but producers need to understand they are a legally binding document."
The shipment will focus on export weight lambs, with 56kg-plus (25-25kg carcass weight) wethers forward contracted for $100/head for February 28, 2011 delivery. Wellard's are offering $95 for wethers 50-55kg, $85 for 44-49kg wethers and crossbred wethers 38kg-plus.
"We are at risk from competition from countries like North Africa who are sending meat," Mr Robinson said.
At this stage the ships will sail from Fremantle.
