How close is the sheep flock to liquidation phase?

Last week the Australian Bureau of Statistics (ABS) released their quarterly livestock slaughter data for the final quarter of 2023 and this allows us to measure how the sheep turnoff ratio (STR) is performing and what it can tell us about the phase of the flock cycle we are presently undergoing.

The STR measures the percentage of sheep turned off into meat works and live export as a proportion of the total flock, expressed as a rolling 12-month average.

Historically an STR of 14% is the pivot point between flock rebuild and flock liquidation, sheep turnoff higher than 14% means there are not enough breeders being retained to grow the flock and we see flock numbers liquidated. In contrast, an STR under 14% means there is enough breeding stock being retained on farm to grow the flock.

As at the end of 2023 the STR sits at 13.1%, up from 12.6% as per the September 2023 quarter result. The STR continues to grind towards flock liquidation territory, but we are not quite there yet. An STR of 13.1% suggests marginal flock growth for 2024, but we need to remain under 14% throughout the season for this prospect to remain viable.

The scatter plot of annual average STR to annual flock change shows an STR of 13.1% would point to flock growth of around 1% in 2024. Meat and Livestock Australia (MLA) are yet to release their flock projections update for 2024 but their earlier release last year pegged the flock growing by just 0.6% in 2024 to 79.2 million head. On current STR calculations this seems to be a reasonable expectation.