Mecardo Analysis - Rising sheep slaughter will lead to flock flop
- By: "Farm Tender" News
- Ag Tech News
- Aug 14, 2018
- 657 views
- Share
By Angus Brown | Source: MLA, ABS, Mecardo
With all the fanfare around record lamb prices week after week, the mutton market has been pushed into the background. It’s fair enough, mutton prices have weakened, as they generally do in dry times, and this doesn’t make for great headlines. With slaughter rates as they are, we’ll see the headlines when it finally does rain.
It seems some drought-affected producers have bitten the bullet and decided to cash in some sheep. Figure 1 shows the dramatic lift in sheep slaughter on the east coast, with 56,000 head added across the course of two weeks.
In fact, we haven’t had seen sheep slaughter this high since the autumn of 2015. There has been a lift across the big three states. Victoria is killing 50% more sheep than this time last year, New South Wales is up 33% and South Australia has doubled its kill.
Sheep slaughter does normally lift at this time of year and continues to rise through until the end of the year. However, it doesn’t normally rise this much, with slaughter of more than 140,000 head normally reserved for the spring and summer months.
As we noted in an article a fortnight ago, lamb marking rates are well down in parts of NSW. Culling dry ewes is what normally starts to lift slaughter rates and high numbers of dry ewes are likely adding to supply.
The rise in sheep slaughter has taken up kill space made available by the tightening supply of lambs. Mutton prices have reacted as they should when supply increases by 50%. The National Mutton Indicator (Figure 2) has lost 15% over the last month. Remarkably, mutton prices remain stronger than this time last year. Mutton prices have actually never been this strong at this time of year, which says something for the current demand strength.
If sheep slaughter rates continue at these levels for the rest of the year, the flock will take a hit. In 2015, we had 3 months of slaughter around 150,000 head and that year the flock declined 2%.
Key points
* Sheep slaughter has spiked in the last three weeks to three-year highs.
* Mutton prices have fallen, but remain relatively strong given slaughter rates.
* The sheep flock is likely to decline, with high sheep slaughter unlikely to be replaced by lambs.
What does this mean?
The flock at the end of 2017 was higher than at the end of 2014, so in theory, we have more sheep to kill this year while maintaining the flock. However, in 2015 the lamb crop was 32 million head and slaughter was lower than we expect in 2018.
With more old sheep being slaughtered and fewer lambs being held or marked to replace them, the flock is likely to face a decline. In 2006 the decline was 6% and in 2002 it was 7%, and this is the worst case scenario for the flock but the best case scenario for prices.
Share Ag News Via