Source: ABARES. Click on chart to view in larger format.

Tight supply versus strong export demand is expected to fuel an expansion of the national sheep flock in the next five years, according to forecasts released by the Australian Bureau of Agriculture and Resource Economics and Sciences today.

ABARES believes the Australian flock will grow from 71 million head this financial year to 76 million head by 2019-20, which, if achieved, would take the flock to its biggest level since 2005.

Growing export demand helped by an assumed lower Australian dollar is expected to keep placing upward pressure on prices.

Saleyard lamb prices are forecast to rise in real terms from 510c/kg in 2014-15 to 570c/kg in 2015-16,.

Sheep prices are predicted to increase in real terms from 310c/kg in 2014 to 355c/kg in 2015-16.

However, as sheep numbers build up over the medium term and turnoff starts to rise again, saleyard prices are projected to decline gradually.

ABARES foresees lamb prices easing back in real terms to 539c/kg by 2019-20 and sheep prices to 323c over the same period.

In the short term, flock rebuilding is expected to drive higher prices for breeding ewes in particular.

The pace of flock rebuilding will be tempered by expected strong export demand for sheep meat and hence relatively favourable prices for both lamb and sheep.

Graziers will be facing the challenge of choosing between flock rebuilding and turn-off for favourable prices.

The shifting focus from wool to prime lamb production in recent decades has also been borne out by the latest figures.

In 2014–15 lamb slaughter is expected to reach 22.3 million head, the highest since 1971–72, when the Australian sheep flock was more than twice its current size at 180 million head.

In 2015–16 Australian lamb slaughter is forecast to fall by 4 per cent to around 21.5 million head, assuming farmers rebuild flocks in response to average seasonal conditions.

The forecast decrease in lamb slaughter is expected to result in a 5 per cent decrease in lamb production to 466 000 tonnes in 2015–16.

Over the medium term, lamb slaughter is projected to fall by around 1 per cent a year until 2017–18, before rising to 22.8 million head in 2019–20.

Mutton production to fall sharply in 2015–16

Adult sheep slaughter in Australia is estimated to fall by 9 per cent in 2014–15 to around 9.2 million head. Assuming a return to average seasonal conditions in 2015–16, sheep slaughter is forecast to decrease by 33 per cent to 6.2 million head. This is because more female sheep are expected to be retained for flock rebuilding and the availability of sheep for slaughter will decline.

As a result, mutton production is forecast to fall by 35 per cent, from 221 000 tonnes in 2014–15 to 143 000 tonnes in 2015–16.