In late August the NSW Restocker Lamb spread to the Eastern States Trade Lamb Indicator (ESTLI) jumped to a 35% premium as an improved spring rainfall outlook encouraged producers to consider a flock rebuild.
As of last week’s closing prices, the NSW Restocker Lamb spread remains at a 27% premium to the ESTLI. In contrast, the Victorian Restocker Lamb spread is managing near a 5% premium to the ESTLI.
Restocking optimism is on the rise, but are we in a flock rebuild yet? A great measure of flock rebuild/liquidation, developed by Andrew Woods from Independent Commodity Services, is the sheep turnoff ratio (STR). It shows the proportion of sheep sent to slaughter or live export as a proportion of the flock.
As highlighted when compared to the annual change in the flock, the EP3 version of the STR shows that since 1990 a turnoff ratio below 14% was consistent with a flock rebuild, while above 14% was a signal that liquidation phase was in place.
In recent months the STR has begun to trend downwards, but at 15% remains reflective of flock liquidation.