The latest Australian Wool Forecasting Committee report reinforces the point that the Australian sheep flock is shrinking. This article takes a look at sheep and lamb sales to abattoirs to help assess the rate of shrinkage in sheep numbers.
Sheep and lamb sales to abattoirs over a period of a year provide a view on whether the sheep flock is contracting, expanding or is stable, when expressed as a proportion of the starting flock size. Mecardo looked at this relationship in April 2023. The requirement for an estimate of flock size presents a problem for Australia at present, as the Australian Bureau of Statistics (ABS) is struggling to develop estimates of the national flock beyond 2022. To be fair to the ABS, many forms of surveys are struggling in the modern world, as this blog post by Bill Mitchell outlines (read more here).
In the short run, seasonal conditions are the key driver of variations in flock size, usually achieved through changing the number of adult sheep sold off farm to abattoirs, although this is changing with the increased production of lamb. In the longer run, the relative profitability of competing enterprises will drive change. It is well-nigh impossible to disentangle these two drivers of decision making when it is dry, as it has been during the past year in western Victoria, South Australia and southern NSW. Therefore, keep in mind that we have both factors working against sheep numbers in the graphs presented here.
Figure 1 shows the eastern sheep offtake, around a moderate 14% (slightly contractionary), while Figure 2 shows the eastern lamb offtake to have fallen from around 36% in mid-2024 to around 33%. The underlying eastern flock is assumed to have shrunk by 2% in 2023-24 and 5% last season. Eastern sheep numbers are hanging on spring rainfall in the dry regions of the past year. Changes in the offtake levels are negatively correlated to changes in rainfall, so improved rainfall in the next few months will pull offtake levels lower, helping to stabilise the flock size and also underpinning sheep meat prices.
Figure 3 combines the eastern sheep and lamb offtake with the combined annual offtake overlaid, as well as the eastern flock size (interpolated to monthly data from annual estimates). The graph covers the past two decades. An assumption drawn from this data is that the neutral combined offtake for eastern Australia is around 45% (the flock can sell 45% of its size in 12 months of sheep and lambs while holding its size). Using that assumption, the recent offtake of 50% implies the eastern flock shrank by around 5% last season. Note that this method tells us nothing about changes in the breed makeup of the flock.
Figure 4 shows the combined offtake for Western Australia, where the largest change in flock has been occurring. The combined offtake (which looks back over the past 12 months) remains high, but improved rainfall seems likely to pull it lower in the coming months. For 2023-24, the western flock has been assumed to have shrunk by 16% and by a further 20% last season, which puts the estimated flock size in the range of 7-8 million.
What does it mean?
We are back to waiting on spring rainfall for the southeastern sheep regions in Australia, in particular, to help staunch the loss of sheep to abattoirs. Once sufficient rainfall occurs, we can then begin to assess the impact on sheep numbers, in particular merino sheep, of the combination of high sheep meat and low wool prices.
Key Points
- Combined sheep and lamb off takes (which are backward-looking) remain at contractionary levels in eastern and Western Australia.
- Offtake levels are sensitive and negatively correlated to rainfall, so improved spring rainfall is required to pull them lower.
- Lower offtake levels would help stabilise the flock size and also underpin sheep meat prices.
Click on graph to expand
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: ABS, MLA, Bill Mitchell, ICS, Mecardo
