Sheep farmers face stock conundrum

THE sheep turnoff ratio (STR), a measure of the proportion of sheep slaughtered and sent out of the country as live export as a percentage of the flock, sits near the lowest levels seen in more than three decades, with the September quarter ratio calculated at just 9.2 per cent.

The annual average STR is at 9.1 per cent, well below the 14 per cent threshold that determines if the flock is in rebuild (under 14 per cent) or liquidation (more than 14 per cent).

An annual average STR of 9.1 per cent suggests a strong increase to the Australian flock will be seen during 2022, which is consistent with the 7.7 per cent gain in the national flock that Meat & Livestock Australia is forecasting this year.

Anecdotally, it is reported that high fertiliser and fuel costs are encouraging cropping farmers to consider adding livestock, predominantly sheep, to their enterprise mix. Similarly, for farmers already producing crops and sheep there is a strong desire to increase the livestock to crop ratio to keep fertiliser and fuel costs under control.

Sheep producers in Western Australia are faced with a peculiar conundrum. Do they increase their holdings of sheep, which in WA are mainly merino varieties, knowing that the eventual phase-out of the live sheep trade could place them in a precarious position?

WA merino wethers are the mainstay of the live sheep trade and increasing the merino flock in WA could leave producers with limited turnoff options once the live sheep trade is phased out.

A comparison of results from the Meat & Livestock Australia/Australian Wool Innovation producer survey between 2017 and 2022 demonstrates that, on a national level, merino sheep types dominate ewe and lamb livestock holdings across the country.

Merino sheep varieties in WA are even more dominant than the proportional levels reported at the national level.

Combined, merino and merino (other) ewe categories in WA represent 93 per cent of the ewe flock compared with around 72 per cent of the national ewe flock.

The merino (other) ewe category in WA has seen a lift in the proportion of the flock from 25 per cent to 30 per cent over the past five years.

Meanwhile, first-cross ewes on hand in the state have declined from nearly 4 per cent of the ewe flock in 2017 to just 0.5 per cent of the flock in 2022.

Unsurprisingly, WA merino lambs dominate the lamb flock too, representing nearly 68 per cent of the WA lamb flock in 2022.

In contrast, national merino lamb numbers represent just 54.5 per cent of the national lamb flock.

First-cross lambs in WA have lifted from 20.2 per cent in 2017 to 21.5 per cent in 2022 as a proportion of the lamb flock.

Shedding, dual purpose and other lamb varieties in WA have seen their proportion of the lamb flock decline over the last five years.

Shedding ewes and merino (other) ewes in WA are the only two categories to see increased numbers over the past five years, up by 18 per cent and 5 per cent, respectively.

In contrast, first-cross ewes numbers are down by nearly 90 per cent from 2017 to 2022.

While some categories of lambs on hand have seen a proportion increase when assessing their contribution to the total WA lamb flock, in terms of number of head, all categories of WA lamb have recorded declining volumes.

Dual-purpose lambs have led the decline, off by 61 per cent over the past five years.

Shedding lambs and other lamb varieties have also seen strong reductions, with numbers down by 38 per cent and 34 per cent, respectively.

WA merino lambs and first-cross lambs were down by 17 per cent and 14 per cent, correspondingly.

If WA producers are considering an increase to their sheep flock in line with the national lift that the sheep turn-off ratio suggests is occurring, they may want to reconsider a pivot towards more meat-producing varieties rather than the merino.

The only problem is that, from a climate perspective, more of WA agricultural land is suited to the merino rather than the meat-producing breeds.

Matt Dalgleish is a manager of commodity market insights at Thomas Elder Markets (TEM)