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Thursday, October 27, 2016

Trends in the South African flock

By Andrew Woods  |  Source: South African DAFF

Key points

  • Since the mid-1990s the South African flock offtake has been trending higher, which is consistent to trends in the Australian and New Zealand flocks.
  • Part of the story underpinning this rise in flock offtake has been a decline in the merino proportion of the flock to around 52-53%.
  • The South African flock looks to be responding to common (international) price signals in a similar manner to Australia and New Zealand flocks.

2016-10-27 SOUTH AFRICA FIG 1

2016-10-27 SOUTH AFRICA FIG 2

South Africa supplies about 50 million kg (greasy) of merino wool to the world markets, which is one sixth of the Australian volume. In the constrained circumstances of wool supply around the world it is worth noting the production trends in other major merino producing countries. To help understand what is happening in South Africa, this article takes a look at the South African flock offtake (sales of sheep and lambs as a proportion of the flock size).

Mecardo has covered the sales of sheep and lambs as a proportion of the flock for Australia ‘Sheep offtake’ and New Zealand ‘Sheep offtake - NZ’. South African slaughter data is not available in the same detail, so a combined sheep and lamb (and goat) slaughter number is used to develop a flock offtake number for South Africa. The goat flock has been stable around 2 million so it assumed the goat proportion of the slaughter number is reasonably small and stable.

When looking at flock offtake the first thing to check is the breed makeup of the flock. Figure 1 shows the merino proportion of the South African flock for the past four decades. It shows that the merino proportion of the flock trended downwards from around 65% in the mid-1970s to around 52-53% by early last decade, a level at which it has stabilised. The non-merino flock in South Africa has been fairly stable, around 10-12 million, during the past 40 years with nearly all the change in the flock size coming from change in the merino numbers.

So, what has the flock offtake (the sum of sheep and lambs sold in a 12 month period expressed as a proportion of the flock size) done? Figure 2 shows the South African flock offtake for the past 40 years along with the year on year change in the flock size. For the first half (20 years to the mid-1990s) the flock offtake has a tidy negative correlation with the flock size falling when the flock offtake rose to around 27-29% and picking up when the flock offtake fell to around 21%. 

From the mid-1990s onwards the flock offtake starts to trend higher, while the year on year change in the flock settles down. The South African flock did continue to shrink by 16% from the mid-1990s to the mid-2000s but the correlation between the flock offtake and change in flock size disappeared. The offtake for 2014-15 was 32% well above the peak levels of the 1970s and 1980s, with the flock size stable. This change in flock offtake looks to have followed a similar trend to Australia and New Zealand where the main driver to the upward trend in the flock offtake since the mid-1990s has been a rising lamb offtake.

What does this mean?

Sheep flocks in the southern hemisphere (and probably in the northern hemisphere but data for the likes of Chinese and Russian flock is hard to get and of low quality) tend to respond to international prices signals. The price signals are really price relativities between commodities so exchange rates are a minor factor. The good news is that the merino component of the flock has stabilised in South Africa even if they are slaughtering a greater proportion of the flock than historically.

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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