We are already witnessing the impacts of tight lamb and sheep supply in early 2020, and forecasts are for this to continue. Meat and Livestock Australia (MLA) released their sheep industry projections earlier this week, and given the survey results we looked at last week, its little wonder the flock is set for another low.
The official flock numbers for the 30th June 2019 will be released sometime in the coming months, and it is an easy one to get wrong, but MLA is forecasting an over 100 year low. The estimated sheep flock for 2019 is at a lowly 66 million head, 2.2% below the previous 100 year low hit in 2016.
The year on year decline in 2019 is expected to be 6.5%, and with strong sheep slaughter in the second half of 2019, MLA is forecasting the June 30 2020 flock to fall a further 5.1% to 63.7 million head.
Figure 1 shows the extent of the flock decline in the past 20 years. If the 2020 forecast comes to fruition, the flock will be 46% lower than it was at the turn of century. MLA is expecting flock growth in the coming years. This is not surprising with strong returns from sheep likely to encourage a flock rebuild.
In 2016 and 2017 we saw that a rapid flock rebuild is possible with good seasons, with the flock now likely to be made up largely of females.
It is a testament to the sheep industries productivity improvements that 2020 is expected to produce 16% more lambs than 2000, out of a flock which is 46% smaller. Again, the demise of the wether helps with this.
Still, lamb slaughter is expected to finish 2019 at a 6 year low of 21.55 million head (Figure 2), down 5.2% on 2018. Further falls are likely in 2020 with a flock rebuild causing another 2.6% fall. From the 2020 low of 21 million head, lamb slaughter is expected to grow to a new record of 23 million in 2023.
A heavy 22% decline is expected for sheep slaughter in 2020, but at 7.2 million head it is expected to remain above the low experienced in 2016. From 2010 to 2012 we saw what an extreme flock rebuild could do to sheep supply, with slaughter dipping under 5 million head, but MLA is expecting a reaction more akin to 2016 and 2017 this time.
What does it mean?
We know what tighter supply does to markets, and with sheepmeat demand currently at record levels, it is reasonable to expect 2020 to be another record-breaking year. There will, of course, be ups and downs for lamb markets with short term supply fluctuations, but for sheep, it all looks positive.
The same goes for store and female lambs, and the stronger they are, the more support slaughter lambs will receive. Over the longer term the increasing flock and lamb supply should see price steady or ease, but much depends on demand.
Key Points
- MLA’s Sheep Industry Projections are forecasting an over 100 year low for the flock.
- Lamb and sheep slaughter are expected to be down, with a relatively quick recovery for lamb.
- Tighter supply under current demand conditions should see prices push to new records.
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: MLA, Mecardo
