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Thursday, September 03, 2015

What’s interesting about the change in rainfall impact on sheep and wool?

By Andrew Woods, ICS  |  Source: BOM, ICS

Key points

  • Averages by definition smooth out data, and rainfall averages are no different.
  • The weighted average rainfall rank of the past year across sheep and wool producing regions has only been 34%.
  • This average covers up the excellent seasonal conditions along the NSW tablelands, extending to the Monaro.
  • On the other extreme, western Victoria has had an extremely dry year, with Queensland, southern South Australia and Tasmania also dry. 

2015-09-03 Rainfall Rank FIG 1

2015-09-03 Rainfall Rank FIG 2

It is stating the obvious to say that rainfall drives agricultural production. While the actual level of rainfall is important, for markets it is the change in rainfall leading to change in production that is the really interesting piece of information. This article takes a look at rainfall at the regional level for the past year and in recent months. What does this mean for sheep and wool production?

Australian agricultural production is spread across a large area, so extremes of rainfall in some regions are usually balanced out by other regions. It is a rare drought or flood year where the overall average rainfall is extreme. The current season is one of those average to slightly below average seasons that mask big differences in seasonal conditions.

Figure 1 shows the rainfall rank for 16 regions around Australia, running clockwise from northern Queensland around to southern Western Australia, for the past 12 months. The rainfall rank tells us how many years during the past century (most rainfall sites have around 100 years of data) that had less rainfall than the past year. If it has been a wet year (as in the south east of NSW) then 78% of years have been drier. If on the other hand it has been dry, as in south west Victoria, then only 2% of years had less rainfall.  Figure 1 also shows the change in rainfall rank, comparing the rank of the past year to year ago levels.

Rainfall in Queensland remains at low levels. NSW, especially the eastern half, has had a passable to good 12 months overall and then we come to the dry regions. Western Victoria, Tasmania and southern South Australia have had a very dry 12 months, with rainfall rankings all in the bottom two deciles. Northern South Australia has had a good year, while it has been a mixed time in southern Western Australia.

Wool production tends to reflect seasonal conditions of the past year. Wool coming out of the tablelands and Monaro in NSW is reflecting the good conditions of the past year in high staple strength and excellent yields. The rainfall data is saying we should expect finer and less wool out of western Victoria, southern South Australia and Tasmania.

Western Victoria is also the largest regional supplier of crossbred combing wool, accounting for 28% of the national supply last season despite a failed spring.  Add southern South Australia and the proportion rises to 37% for last season. This implies that crossbred wool production faces supply risk in 2015-16 in the event of below median spring rainfall in these key regions, given the low rainfall of the past 12 months. By extension, this means that lamb production also faces some risk in these key regions.

What does this mean?

The 34th percentile rank for rainfall during the past year is about the same as the preceding 12 months. So, on the face of it, sheep (numbers) and wool production (volume and fibre diameter) should not be greatly affected. However, the dry conditions in large crossbred combing wool regions means that crossbred wool and prime lamb production are vulnerable to another dry spring. Spring rainfall is always important, but it will be even more so this year. The good conditions in the northern tablelands of NSW will help to maintain the supply of high staple strength fine wool (which is also flooding out of the southern tablelands and the Monaro).

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. 


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