Mecardo Analysis - Sheep continue to the slaughter
- By: "Farm Tender" News
- Ag Tech News
- Apr 09, 2019
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By Angus Brown | Source: MLA, ABS.
This article is bought to you by Pepperton Poll Dorset & White Suffolk Stud
Late last week the Australian Bureau of Statistic (ABS) released the February slaughter data. As suspected, a few more lambs were slaughtered, and heaps more sheep were culled. As we always say, the more that are killed now, the fewer there are for later.
Each month we’ve been tracking sheep and lamb slaughter, and looking at where it needs to be to hit Meat and Livestock Australia’s (MLA) forecasts for the year. The official February numbers were as expected, and our March estimates, which are based on MLA’s weekly figures, suggest further heavy declines in future supply.
ABS Lamb slaughter for February was up 0.4% on last year, and right on the five-year average. Estimates for March come in at a 2.5% increase on 2018, which will take year to date lamb slaughter to 3% over the first quarter for 2018.
With predictions of lower annual slaughter for 2019, we know that if we’ve killed more to date, there must be fewer killed for the rest of the year to hit the target. For the last 9 months of the year, lamb slaughter needs to be 10% lower than last year. That is a heavy hit, and we haven’t ever seen a fall like it. The closest decline was in 2010 when April to December slaughter was 8% lower than the previous year.
For sheep, the story is similar but more extreme. With February sheep slaughter 27% above last year, and March 25% stronger, there are plenty of sheep exiting the system. For the year to date, sheep slaughter is up 23%.
Earlier in the year MLA forecast sheep slaughter for 2019 at 8 million head. There is now little chance of hitting this mark, with the coming 9 months needing to see slaughter 27% lower than last year. In 2016 sheep slaughter for April to December was 21% lower than the previous year, so we have seen a decline in slaughter like the one expected in the coming months.
Key points
* With sheep and lamb slaughter up on last year, slaughter for the rest of the year would need to decline to record low levels to meet MLA predictions, which we expect will be exceeded.
* The higher the slaughter numbers are, the fewer sheep and lambs there are for slaughter later, meaning if slaughter numbers continue in their high numbers, slaughter will have to grow slower than expected in the next few years
* The increase in price movements we have seen recently reflect lamb and sheep are harder to find, and are likely just the start, as real stock shortages and strong price movements are still to come
What does this mean?
Figures 1 and 2 show how lamb and sheep slaughter will have to pan out to meet forecasts with normal seasonality. While it's possible we’ll see some extremely low slaughter levels, we think targets might be exceeded by the end of the year. This simply means that over the coming years sheep and lamb slaughter will grow more slowly than previously expected.
Figure 3 shows prices have begun to move higher as lambs and sheep become harder to find, or draw out. The recent moves are likely just the start, with real stock shortages and stronger price moves still to come.
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