Ch ch ch changes

Livestock | 8th October 2021 | By Matt Dalgleish

The Snapshot

  • The national sheep flock has been revised up to 70.6 million head for 2021, this is a 3.7% gain on the flock forecast from the June projections.
  • Lamb slaughter for 2021 is now expected to be 20.55 million head, up 1.2% from the 20.3 million head reported mid-year.
  • MLA now expect sheep slaughter to come in at 5.1 million head for 2021, down 16.4% on their June estimate.
  • The market is forecasting the NTLI to decline around 10% from current levels to finish at 835c/kg cwt at the end of December 2021. TEM modelling is anticipating it to be a little softer than this, at 800c/kg cwt.

The Detail

Meat and Livestock Australia (MLA) have issued their final projections for the sheep industry for the 2021 season and there have been some big revisions from the June release. The national sheep flock has been revised up to 70.6 million head for 2021, this is a 3.7% gain on the flock forecast from the June projections report.

Earlier in the year TEM flagged that the sheep turnoff ratio (STR) was showing signs that the flock rebuild could be stronger than MLA was forecasting. In August we suggested the flock could get closer to 69 million head this season instead of the 68.1 million that MLA had posted in their June sheep industry projections.

The October release confirms that the rebuild is coming on at a much faster pace, as highlighted by the STR article published in August, and the growth doesn’t stop this season. MLA are predicting the flock to be at 73.3 million head in 2022 and 76.2 million head by 2023, revisions up of 1.2% and 1.1%, respectively, from their earlier projections.

Despite the increased pace of the rebuild MLA are expecting that lamb slaughter will come in higher than the June estimates. Lamb slaughter for 2021 is now expected to be 20.55 million head, up 1.2% from the 20.3 million head reported mid-year. Robust marking rates and higher joining percentages supporting the increased volumes of lamb available this season for processing, according to MLA surveying. Interestingly, lamb slaughter in 2023 has been pegged back 2.4% to 22.2 million head, a reduction of 600,000 head on the previous estimate.

While lamb slaughter projections have lifted there has been a solid reduction in sheep slaughter estimates from MLA for the 2021 season and continuing through to 2023. This was another possibility that TEM flagged in early September as ABS reported sheep slaughter volumes were not keeping up with the original MLA forecasts and the weekly sheep cull was nowhere near where it needed to be to hit the 6.1 million head slaughter target for sheep that MLA had foreshadowed in their June sheep projections.

MLA now expect sheep slaughter to come in at 5.1 million head for 2021, down 16.4% on their June estimate. Further revisions down are seen in 2022 and 2023. Sheep slaughter in 2022 is expected to come in at 5.8 million head, 18.3% below the mid-year projections. The 2023 sheep slaughter is forecast to be 8.1% softer than originally thought, coming in at 7.4 million head.

As was the case in the beef update from MLA earlier in the year there is now a market price forecast section for the National Trade Lamb Indicator (NTLI). TEM were proud to be participants in the aggregated forecast and the table below shows the average, upper and lower range expected for the NTLI as at the end of 2021.

The market is forecasting the NTLI to decline around 10% from current levels to finish at 835c/kg cwt at the end of December 2021. Although the possible range according to the six participating analysis firms that provided their projections to MLA indicate that the NTLI could finish between 891c and 760c.

Much could depend upon the current processing issues facing Victorian meat works and the lamb volumes seen as the spring flush gets underway in Victoria in the coming months. For what it is worth, TEM are coming in slightly under the average market projections with an NTLI expected to be at 800c/kg cwt as of New Year’s Eve 2021.

Tags

  • Sheep
  • Lamb
  • Supply and Demand
  • Forecast
  • Slaughter
  • Restocking