Mecardo Analysis - Cutting deeper into the flock to start 2019
- By: "Farm Tender" News
- Ag Tech News
- Jan 31, 2019
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By Angus Brown | Source: MLA.
Last week we looked at the opening cattle slaughter rates for 2019 and it seems that the trend of offloading stock is continuing. The same is happening with sheep. Early indications are that the strong flow of sheep to slaughter is continuing, which as always, is bad for prices now, but very good for later.
Similar to the cattle situation, sheep slaughter has started the year running apace. A dry January and high feed costs have seen producers offloading sheep in preference to feeding them through a hot and thus dry summer.
Figure 1 shows the story on the east coast. We don’t have numbers for week 1 of 2018, but for the second two weeks, 32% more sheep have been slaughtered. It took until August in 2018 for weekly sheep slaughter rates to go past 150,000 head and we haven’t seen it in January since 2015.
The biggest sheep slaughter state, Victoria, is driving the increased rates where sheep slaughter is up 44% on last year (Figure 2) and back at December levels already. In NSW, there have only been 5% more sheep slaughtered than last year but it’s still up 19% on the five-year average. NSW was already feeling the pain this time last year and have quite a lot of sheep.
While things are dry in Victoria, we would think with the price of lamb and wool, producers might be trying to retain breeding sheep. However, it looks like the price of grain and a potentially long summer of feeding might have seen many producers make the decision to quit anything which isn’t essential for breeding.
When we look at early 2019 slaughter rates and official numbers from the Australian Bureau of Statistics (ABS), a picture of flock liquidation seems to be coming up. The last 8 months of 2018 (Figure 3) saw above average sheep slaughter and very high levels for the last five. This year has started on the same level.
Key points
* Sheep slaughter has opened the year at very strong levels.
* Dry weather and high grain prices have seen producers quit stock for the last 8 months.
* Sheep supply will have to tighten significantly so see the flock start to rebuild again.
What does this mean?
It’s increasingly looking like fewer ewes will be joined this year, with many having already headed to processors. These figures also make us wonder where the sheep are going to come from for slaughter once it does rain again.
There is a chance that with a good season, sheep slaughter rates could return to lows of 2011 (Figure 3) which will bring with it very good prices for both sheep and lambs. However, very tight supply isn’t great for supplying our growing export markets and could be an issue in the medium term.
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