Cattle herd – In Q2 all Australian states have moved into a liquidation stage, increasing their female slaughter by almost 7% to 8% over the breakeven ratio. The only exception is QLD, where female slaughter was up 4% over the breakeven ratio.
Australia’s liquidation was 53% in Q2, reflecting dry conditions in certain states: VIC, TAS, SA, and WA.
In NSW and QLD, the more significant influence could also be the economic stress farmers have been under and the need to sell females, particularly those that were empties, to an improved pricing market.
Given the losses and hardships of last year many producers needed the cash. And for many, this was a strong enough reason. It’s no different from what happened in 2020. The rains came in January 2020 but liquidation continued for at least another eight months as farmers sold their empties, taking the cash after three years of feeding animals. This situation has repeated itself with rain coming to many parts of Australia in early 2024. Most of QLD and Northern NSW saw an ongoing good season, while other states have had far more challenging growing conditions.
Sheep flock – As stated in previous reports, the mutton kill comprises ewes with almost no wethers retained. Hence, a heavy mutton kill reflects a heavy female sheep kill and liquidation, and a low mutton kill reflects ewe retention and a rebuilding process.
Further liquidation across Australia is expected for most of this year but at a reduced rate, with a strong flock rebuild expected to commence in 2025.
Australia’s flock continues to liquidate at a heavy pace, with both mutton and lamb kills indicating that some growers are looking to exit the industry. When speaking with farmer groups in NSW, VIC and SA, many have indicated that some sheepmeat producers are moving into cropping and cattle production. These figures seem to me to reflect this sentiment.
The breakeven on mutton kill is 1.94 M head per quarter, above which liquidation occurs and below which rebuild is underway.
Given the current kill rate for lambs and mutton, a significant fall in flock size is expected, along with lamb and mutton kills in 2025 and 2026. Simply, you cannot kill small stock at this rate without consequences.
I expect a flock size of potentially 62 M head next year, a significant fall from the 2022 peak of 70.2 M head. Improved lamb pricing in 2025, 2026 and 2027 is expected.
~Simon Quilty