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Thursday, October 15, 2015

What do higher lambing percentages mean for price?

By Angus Brown  |  Source: MLA, AWI, NLRS

Key points

  • Anecdotal evidence suggests lamb marking rates are around 10% stronger in western Victoria this year.
  • Reports continue to come in of more merinos being joined to crossbred rams for lamb production.
  • While increased lamb marking rates on a local scale can add 1-2% to lamb supply, flock rebuilding is likely to have a stronger impact.

Facebook SHEEP Mustering

2015-10-14 Marketing Rates FIG 2

Anecdotal evidence circulating around Hamilton suggests that the benign weather in winter and spring, along with heavy feeding regimes over summer, have seen lambing percentages in western Victoria and south east South Australia for crossbred sheep around 10% higher this year. Here we explore what, if anything, this means for lamb supply and prices over the coming months.

To get any meaningful supply information out of anecdotal evidence on marking rates, we need to have some idea of how many breeding ewes it applies to.  The MLA-AWI June Wool and Sheepmeat survey suggests there were 41 million head of breeding ewes in Australia.  A simple calculation of a 10% increase in lambing rates would add 4.1 million head to the lamb supply over last year, given there is a similar number of breeding ewes on hand.

Just over 30 million of the breeding ewes on hand are Merinos, which are highly unlikely to see a 10% increase in lambing percentage.  If we apply the 10% increase to ‘other’ ewes, which total 10.5 million head according to the MLA-AWI survey, we get an increase in lamb supply of 1.05 million head.

This anecdotal evidence is confined to western Victoria, for which we don’t have specific numbers. However, the MLA-AWI survey estimates Victoria had 3.07 million head of ‘other’ breeding ewes.  A 10% increase across all of Victoria’s crossbred lambs would add an extra 300,000 head of lambs to supply, which equates to 3% of Victorian slaughter and 1.5% of national slaughter.

The other anecdotal reports we have heard is the swing from Merinos to crossbred sheep, and the increased lamb supply this will bring.  This is quite obviously being indicated by rising lamb slaughter and a falling flock (figure 1).

The question is whether the reported continued increase in the proportion of crossbred sheep in the flock will see lamb slaughter continue to rise steadily.  Historical evidence would suggest not, with the falling total flock over the past three years likely to counteract any increase in efficiency through a higher proportion of crossbred sheep.

What does this mean?

The lesson to take from this is that, while anecdotal evidence can be useful in assessing the local supply situation, on a national scale it’s much harder to get a handle on where supply is headed.  An increase in lamb supply of 1.5% is not insignificant. However, it’s unlikely to have a major impact on prices over the coming months. 

We have seen in the past that a good season and flock rebuild is what can really negatively impact supply. Moreover, it’s hard to see fewer ewes producing significantly more lambs, even if the proportion of crossbreds is growing.

The major concern in terms of upcoming supply is shown in figure 2, with winter and spring lamb slaughter running 6.7% behind last year’s levels. This means that, under a steady total supply scenario, which is possible, we’ll see heavier slaughter over the coming six months.  Otherwise we are on the way for a flock rebuild.

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