Sheep flock headed for 90-year low

August 5, 2008

Australia's sheep flock, already at its lowest in more than eight decades, will continue to shrink in the coming three years, reversing a previous forecast for the flock to expand, industry body Meat & Livestock Australia said.

The flock is forecast to drop to around 76 million head by 2011, the Sydney-based group said today in an e-mailed report, lower than the 95.5 million it forecast in February. A flock of 76 million head would be the lowest since 1916 if achieved, said Peter Weeks, the group's chief market analyst.

Sheep numbers have plunged as the nation's worst drought on record forced farmers to slaughter animals as feed supplies ran out and grain costs soared. Record grain prices have spurred farmers to switch from livestock to crops seeking to replenish income depleted by years of dry weather.

``It's a huge rethink of where this sheep flock is going,'' Weeks said by phone. ``We've had a fundamental shift in the relative returns to grain versus wool in particular and those shifts globally look like being sustained.''

The flock fell to 80 million head in the year ended June 30, the lowest since 1920 and 8% lower than previously estimated, Meat & Livestock said.

``We were expecting the flock not to fall much further in the near term and that would've given us some sort of base to turn it around,'' Weeks said. ``Now we are not likely to turn the fall around for two to three years and by that stage you'll have a flock much lower than what you had to start with.''

Flock numbers aren't likely to improve unless wool prices gain or there are seasons of above-average rain, Weeks said.

Bloomberg News