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Change in Australian Sheep Flock

25 August 2014

In the last decade, the Australian sheep flock has changed dramatically, in both numbers and breed demographics.

As a result, it has altered the Australian wool clip, according to Australian Wool Innovation.

Over this period, the flock fell by 30 million sheep (-29 per cent) to the current flock size of 72 million.

With wool production being a close function of sheep numbers, wool production has fallen by 31 per cent to 330 million kilos greasy.

australian sheep production chart 1

The chart shows a 10.5 million decrease in ewes breeding for Merino lambs from 2004 to 2008.

Since then, it has recovered a little and stabilized at the 21 million mark.

Conversely, ewes breeding for other lambs have increased steadily, edging up to 20 million.

Looking ahead, the percentage of Merino and other breeds will remain relatively stable.

Australian Wool Innovation says that there are no clear signs showing a genuine increase in the flock size: grower intent to increase flock size is being affected by seasonal conditions, especially in the Eastern States.

In the same period, the flock composition has undergone some changes.

It has moved away from wethers to ewe-based flock.

Ten years ago, ewe numbers made up 50 per cent of the total Australian flock, 21 per cent in wether and 29 per cent in lambs.

In the current season, ewe numbers are 58 per cent of the total flock, 12 per cent in wether and 30 per cent in lambs.

Given the decline in Australia’s flock size over the 10 year period, it is not surprising to see wool production fall by 31 per cent.

However, it was not just a simple reduction in volume but also a change in micron distribution — what Australia is producing has changed.

In that period, fine wool (less than 19.5 micron) volume increased by 2.5 million kilos greasy (+1.7 per cent), where broader wool (greater than 19.5 micron) has decreased by 151 million kilos greasy (-45 per cent).

Predominately the increase was in the sub 17.5 microns. Although starting from a low base, less than 16.5s have increased by 276 per cent and 16.6-17.5 have increased by 60 per cent. In contrast the broader wool, from 20.6-24.5s experienced a 60 per cent decrease. This dynamic change in what we produced has dampening effects on prices.

Australian sheep production chart 2

The World’s Recovery

The world is on track for a mild recovery in 2014 that builds into 2015.

The US and Europe, representing some 35 per cent of global GDP in 2014, are recovering from an asset price bust that hit in 2008.

Recoveries from such recessions take at least seven years, as balance sheets have to be rebuilt and tighter bank regulations have to be digested.

The US has done most to repair corporate, bank and household balance sheets and its recovery is now strong enough to support a global turnaround.

Europe has done much less to address its underlying problems, so its recovery is much weaker.

However, risk has declined in Europe and weak growth should continue. Growth in China, the world’s third big engine has slowed, as it struggles to cushion a fall in property prices and avoid a related financial crisis.

This remains the single biggest threat to global growth, yet by end may it seem that reforms and modest stimulus are both underway and should help secure GDP growth around seven per cent.

August 2014

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