Market Morsel: Coming into line

Market Morsel

In July MLA revised their flock projections for 2022. An increase of 7.7% is now expected this year with the flock expected to grow from 70.6 million in 2021 to 76.0 million in 2022. Back in May we flagged this revision upwards may have been on the cards as the sheep turnoff ratio (STR) was showing the strongest rebuild of the flock seen in many decades.

The STR  is a measure of the proportion of sheep turned off as a percentage of the flock. Above 14% and we are in flock liquidation, below 14% and we are in rebuild territory. The release of the ABS quarterly slaughter figures last week allows us to check in on the current progress of the STR and what it means for the current flock rebuild.

The June quarter STR remains static at 9.1%, which is the lowest it has been in over three decades (our records go back to 1989). The relationship between the annual average STR and the annual flock change demonstrates the STR is a reasonably strong predictor of flock growth or decline. At an STR of 9.1% the scatter plot line of best fit suggests an increase to the flock this season of around 8%, which is nicely in line with the MLA prediction from their sheep industry projections released in July.