Spring flush to set the tone for sheep markets
With spring fast approaching it is time to look at the trends in the sheep industry in 2020-21 and how they could shape the next 12 months. Recently, AuctionsPlus released a breakdown of what was a record year for sheep and lamb sales on the platform, selling 4.43 million head in 2020-21, up 10 per cent (pc). The breakdown shows what impact flock rebuilding activities have had on throughput and price, while providing an indication of what the market could expect in 2021-22.
Evidence of restocking
Seasonal conditions played a key role in determining the level of influence domestic market factors had on throughput and price in 2020-21. Favourable seasonal conditions led to an elevated level of feed, prompting graziers to retain breeding stock, and put a focus on rebuilding flocks. This was evident by tight supply in the proven breeder categories. The number of merino ewes offered online marginally increased, up 5pc to 361,059 head. While the number of first cross ewes was unchanged at 92,435 head.
To rebuild flocks, demand shifted towards ewe lamb categories with first cross ewe lambs recording an 86pc increase in throughput, just shy of 350,000 head. While Merino ewe lambs recorded an increase of 8pc, reaching 207,786 head.
Balancing supply and demand
Whilst the head count is irrelevant, the trend of both older ewe and younger ewe categories suggests that flocks have grown and that there will be an increase in supply of lambs in 2021-22. However, the increase in supply will not automatically translate to a decline in price of the same magnitude. In 2020-21, the price of first cross and Merino ewe lambs increased by 2-14pc according to AuctionsPlus. Most of the price increase was due to demand from restockers as opposed to export market factors.
The key difference between 2020-21 and 2021-22 is the split between restocker and consumer demand. As COVID-19 controls progress in Australia and in key export markets, food service channels are expected to provide a higher level of demand compared to 2020-21. In export markets, both the U.S and China are showing signs of firm demand for lamb, whilst the Middle East remains subdued due to a lack of air travel.
From a restocker point of view, demand may not eclipse the level of 2020-21, however feed availability remains high which could give restockers confidence to take advantage of any extra supply. The outcome for price will depend on the speed of export market growth and the remaining carrying capacity on-farm. If both factors combine, the expected dip in spring lamb prices could be short lived and result in an average spring price that is above the long-term average for most categories of sheep and lamb.
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