Ewes are growing
The Snapshot
- The December 2020 quarter shows that the sheep turnoff ratio has dropped to 10.6%, the lowest it has been since the 2011-2013 seasons.
- A sheep turnoff ratio of 10.5% during the current rebuild phase would suggest that the flock is likely to grow by 4.9% during 2021, just a fraction off the MLA target of 5.2%.
- A more conservative approach, using the average STR during the 2011-13 period of 11.9%, would put the estimate of the flock rebuild for 2021 at a 2.7% increase over the season.
The Detail
The Australian Bureau of Statistics (ABS) quarterly slaughter data to the end of 2020 shows that the sheep turnoff ratio (STR) has dropped to levels consistent with a flock rebuild. Our last update of this ratio, for the September quarter, indicated that we were close to a rebuild beginning with the STR sitting at 14.3%.
Historically, the threshold between rebuild and liquidation is 14%. An STR under 14% and we usually see the flock begin to increase on an annual basis. In contrast, a STR over 14% and the flock generally posts an annual decline.
The December 2020 quarter shows that the STR has dropped to 10.6%, the lowest it has been since the 2011-2013 seasons when we saw three successive years of flock rebuild. This rebuild was the culmination of a very wet 2010/11 that gave producers the confidence to increase their flock sizes.
Meat and Livestock Australia (MLA) released their sheep industry projections in February and it showed that they are anticipating a 5.2% increase to the flock during the 2021 season. Analysis of the correlation between the annual average STR and the annual change in the flock shows a moderately strong relationship between the two series, with a Pearsons correlation coefficient of 0.647.
During the 2011-13 period the average STR ranged between 10.5% to 13.6%, and averaged 11.9% across the entire three years. Assuming a more aggressive rebuild, with an STR at 10.5% during the current rebuild phase would suggest that the flock is likely to grow by 4.9% during 2021, just a fraction off the MLA target of 5.2%. This is based on using a line of best fit to estimate the annual change using an STR of 10.5%.
Under this scenario the flock would increase from 64 million head in 2020 to 67.1 million head in 2021, just 200,000 head short of the MLA target.
Taking a less aggressive approach and using the average STR during the 2011-13 period of 11.9% would put the estimate of the flock rebuild for 2021 at a 2.7% increase over the season. This would see the flock increase from 64.0 million head in 2020 to 65.7 million head in 2021.
Meanwhile, a very conservative view of the rebuild using an STR of 13.6% (the top of the range seen during the 2011-13 season) would suggest that the flock would hardly register a rebuild at all, with the line of best fit indicating an annual increase of just 0.005%, and the flock moving from 64.0 million head in 2020 to just 64.3 million head in 2021.
