Brought to you by AG Concepts

Tuesday, July 31, 2018

Quantifying drought impacts on lamb supply.

By Angus Brown  |  Source: MLA, ABS, Mecardo

Key points

  • Drought in NSW is seeing much lower lamb marking rates reported.
  • Weaker marking rates could lead to two million fewer lambs marked this year.
  • The impact of lower marking rates on supply is hard to gauge, but we should see fewer lambs available this year.

2018-07-31 Sheep Fig 1

2018-07-31 Sheep Fig 2

We’ve been commenting for weeks on the impact the dry weather in New South Wales, Northern South Australia and Victoria is having on the timing of the turnoff of winter sucker lambs. What is even harder to put a number to, is how the dry will impact total lamb supply for 2018. Here we’ll try and put some numbers around it.

The worry we’ve been hearing about recently is that NSW lambs which weren’t at slaughter weights as suckers are going to flood the market in spring and early summer, competing with suckers from the south. Obviously, the concern for the thus far fortunate southern lamb producers is that prices will be much weaker as supply overcomes demand.

The theory behind this is sound, however, it doesn’t take into account the fact that in drought fewer lambs are going to be produced in total. 

We’ve heard some shocking lamb marking anecdotes from Western NSW in recent weeks. These range from 30 lambs from 1000 ewes (3%) to marking rates up to 20%.  Over the last few years marking rates for these areas has been 80-100%. MLA’s sheep flock distribution map (Here) shows that Western NSW was home to 2.5 million head of sheep in 2016.

The national breeding ewe proportion of the flock is 55%. At 100% marking rates, there are 1.37 million ewes in Western NSW producing 1.37 million lambs.  At 20% the number of lambs is 275,000 head, and at 50% it is 687,000. There is likely to be between 500,000 and 1.2 million fewer lambs coming out of Western NSW.

It gets scary when we apply the same thinking to the more populous sheep areas of Lachlan, Murrumbidgee and Central West. All are drought affected or in drought, having received 20-40% of their average rainfall for the last six months.

These three regions of NSW are home to 16 million sheep, and at 55%, about 9 million breeding ewes. Assuming marking rates of 95%, you would expect these regions to produce 8.5 million lambs.  It’s hard to put a figure on marking rates under drought conditions as extensive as those currently being experienced, but Figure 1 shows how many lambs these key regions will produce under different marking rates.

Marking rates of 80% will see 1.35 million fewer lambs produced, with every 5% decrease wiping a further 450,000 head off potential lamb supply.

What does this mean?

History tells us that just because the number of lambs marked falls doesn’t mean lamb slaughter will fall. However, it’s hard to argue a dramatic fall in the lamb crop will see lamb slaughter rise. With lower lamb marking rates, we expect the NSW lamb crop to be at least 2 million head fewer. Figure 2 shows how this would impact lamb slaughter in 2018-19 if the full two million are stripped off slaughter. 

If it rains, even fewer lambs are likely to make it to slaughter, as producers move to rebuild flocks.  However the timing of lamb supplies is still largely unknown, the late spring and early summer lambs should still be around in reasonable numbers, but other periods could see significant supply squeezes, of the like we are currently experiencing.

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 


Sign up for a FREE BASIC SUBSCRIPTION now to read this article.

Mecardo will send you its latest market analysis outlook delivered to your Inbox as it's published.  You will also receive one month Premium access for free.

You tell us what information you want to hear about, so you'll only be alerted to information that is relevant to you.

Learn more about Mecardo Sign Up Now!