Earlier this year Episode3.net looked at where Australia sat in the livestock cycle. At the time, the sheep sector looked to be slightly further advanced than cattle. The Sheep Turnoff Ratio (STR) had eased back toward levels that historically tend to be associated with stabilisation or the early stages of flock rebuilding. On that reading, the sheep industry appeared to be moving through the worst of liquidation and edging closer to recovery. That broad direction still has some merit, but the picture has changed. The reason is the flock base itself has been reset.In late 2025, the Australian Bureau of Statistics released updated official flock estimates. Meat & Livestock Australia (MLA) then adopted those revisions in its March 2026 sheep industry projections. This matters because the September 2025 MLA projections had been relying on internal modelling for the flock baseline, due to the absence of official ABS inventory data since 2022. The result is not a minor adjustment. It is a substantial rewrite of the recent flock history.
In the September 2025 MLA report, the national sheep flock was estimated at 79.1 million head in 2024, falling to 74.2 million head in 2025 before rebuilding to 75.7 million in 2026 and 78.9 million in 2027.
By the March 2026 MLA report, that trajectory had changed materially. The flock was reset lower to 71.4 million head in 2024, 69.0 million in 2025, 67.2 million in 2026 and 66.4 million in 2027, with a further decline to 64.6 million head forecast for 2028.
That is the key point. The September report was still telling a rebuild story. The March report is telling a continued contraction story. The 2027 flock forecast was cut by around 12.6 million head between the two reports. That is a very large adjustment to the assumed breeding base and to the sector’s rebuild capacity.
This reset also changes how we need to interpret the Sheep Turnoff Ratio. The STR measures sheep turnoff against the size of the national flock. If the flock base is revised lower, then the same slaughter and live export volumes represent a higher level of pressure on the flock.
That is exactly what has happened. The updated flock series mechanically lifts the recent STR readings. It tells us that the heavy turnoff of recent years was not being drawn from a flock as large as previously assumed. Instead, the industry was turning off sheep and lambs at a high rate against a smaller underlying flock. That makes the liquidation phase look more severe.
The monthly STR data shows the pressure was most intense through 2024 and 2025. STR moved above 17pc in early 2025 and held around 17.3pc to 17.4pc for several months. That was occurring while the flock base had already been revised down to around 69 million head.
This helps explain why the March MLA report has moved away from a rebuild outlook. The flock was smaller, the turnoff pressure was heavier than previously implied, and the sale of ewe lambs and pregnant females has reduced future production potential.
There is some improvement in the most recent monthly data. By March 2026, the STR had eased back to 13.8pc. That is down from 15.2pc in December 2025 and well below the peak seen in 2025. So, the direction of the turnoff signal is now improving. However, that does not mean the flock is already rebuilding.
The flock change series shows the national flock declining by 3.8pc in 2024, 3.2pc in 2025 and a forecast 2.7pc in 2026. The pace of contraction is slowing, but the flock is still contracting, for now according to the MLA forecasts.
The updated STR analysis adds an important caveat to MLA’s March 2026 flock forecast. Based on the year to date, the 2026 annual average STR is sitting at 14.3pc. When plotted against annual flock change, this places 2026 closer to the historical stabilisation zone than the heavy liquidation zone. The relationship is reasonably strong, with the scatter plot showing an R² of 0.7171, suggesting STR has been a useful indicator of subsequent flock movement. On that basis, the current 2026 STR reading does not look consistent with another severe year of flock decline.
This does not mean the flock is rebuilding yet. The breeding base has clearly been damaged by elevated turnoff through 2024 and 2025, and MLA’s downward reset to the flock is justified by the revised ABS data. However, if the STR continues to ease through the remainder of 2026, it would suggest that the rate of liquidation is slowing more quickly than MLA’s March forecast implies. In that scenario, the 2026 flock decline may still occur, but the scale of the decline could be pared back. Put simply, the STR is no longer pointing to deep ongoing liquidation. It is pointing more toward a flock trying to stabilise after the damage already done.
The old interpretation was that lower STR readings were pointing to an emerging sheep flock rebuild. The updated interpretation is more cautious. Lower STR readings are now better viewed as a sign that the worst of the liquidation pressure may be easing, rather than proof that a rebuild has begun.
The biological lag is important. Once breeding females have been sold, the flock cannot be rebuilt quickly. Even if producers begin retaining more ewes, it takes time for that decision to flow through to lamb supply and national flock numbers.
The reset also means the industry has less buffer than previously thought. A flock of 67 million head in 2026 is a very different starting point to a flock of nearly 76 million head. It means future lamb availability is more constrained, processor competition for stock is likely to remain elevated, and any seasonal setback has a larger impact on supply.
This does not mean the STR has lost value as an indicator. In fact, it probably becomes more useful. It shows that turnoff pressure has eased from the extreme levels seen through 2024 and 2025. But it also shows that the industry has been through a deeper liquidation event than the earlier data suggested.
The practical takeaway is that the sheep sector is not quite where the previous cycle analysis placed it. It may still be past the peak of liquidation pressure, but the revised flock data suggests the rebuild has been pushed further out. The industry is not starting from a strong base. It is starting from a smaller flock, after a period of heavy turnoff, with reduced breeding capacity and continued seasonal risk.
For markets, this is supportive over the medium term. A smaller flock and lower turnoff should tighten sheep meat availability. The risk for processors is that throughput becomes harder to maintain. The risk for producers is that seasonal conditions need to improve before retention can become widespread.
The flock reset therefore changes the tone of the sheep cycle. The old data suggested sheep were entering the early stages of rebuilding. The new data suggests the industry is only beginning to slow the rate of flock decline. That is still a turning point in the cycle, but it is a much more fragile one.