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Sheep projections

A recovery in the national flock is underway, with sheep producers in key regions now in a position to consider increasing flock numbers. However, estimates for June 2020 pin the national flock at 63.5 million head, its lowest level in more than a century.

The recent improvement in conditions has instilled an element of confidence in producers looking to rebuild depleted flocks, particularly in New South Wales. A lift in weaning rates and weights should help support lamb supply towards the end of the year. However, the impact and severity of consecutive drought years will hinder overall sheep and lamb supply in 2020, especially during the winter. Following back-to-back years of excessive turnoff, sheep slaughter is forecast to decline by 30% to 6.5 million head in 2020. Driven by a reduced breeding ewe flock and subsequent decline in the national lamb crop, lamb slaughter is anticipated to decline to 20.6 million head, back 5% on year-ago levels.

Lamb carcase weights are forecast to increase in 2020, assisted by improved feed availability, a greater number of lambs in lot feeding programs and strong price incentives to finish lambs to heavier weights. Increasing weights will not be sufficient to offset the fall in slaughter. As a result, lamb production in 2020 is forecast to decline 2% year-onyear, to 492,000 tonnes carcase weight (cwt). Underpinned by a substantial decline in sheep slaughter, mutton production is forecast to fall sharply to 161,000 tonnes cwt, back 29% year-on-year.

Global market conditions have been particularly volatile in the past few months, as the spread of COVID-19 has
fostered instability, created logistical hurdles for trade and slowed foodservice industries around the world. This year, exports of lamb are forecast to fall slightly on 2019 volumes, to 282,000 tonnes swt, while mutton exports are expected to reach 129,000 tonnes swt, back 31% on 2019.

Encouragingly, growing retail demand, a soft A$ and the African Swine Fever induced protein deficit continue to drive export prices for sheepmeat, particularly as key markets such as China and the US compete for shorter supplies. However, many key export markets now face economic recession as a result of the COVID-19 outbreak, which could lead to tighter disposable incomes and switching of consumption to lower-priced alternatives.

Overall, sheep and lamb prices are expected to remain at historically high levels for the remainder of the year, given the expectation for fewer lambs and sheep available for slaughter, strong restocker demand for ewe lambs, limited competition from New Zealand, generally strong demand (despite some disruptions) and a low A$.