Meat & Livestock Australia has tipped that Australian sheep producers are likely to pivot back towards wool production off the back of falling lamb and sheep indicators.
The Eastern Market Indicator, is outperforming all sheep and lamb indicators this year, only falling 12 per cent over the last 12 months, compared to more drastic falls in the meat space such as a 38pc drop in the he heavy lamb indicator.
The trend means Australian sheep producers are more likely to pursue wool production over meat production, according to MLA global supply analyst Tim Jackson.
"At present, provided producers can secure shearers, Merino wool production is possibly more lucrative than meat production," he said.
Over the last three years, the proportion of breeding ewes that are Merino has fallen from 77pc in June 2020 to only 69pc in May this year.
The reduction in Merino ewe numbers has been driven by better prices for lambs over the last few years, lower wool prices, access to shearers, amongst other factors, Mr Jackson said.
"This trend is expected to change as the price for lambs remains subdued," he said.
Data shows that the wool price is nearly 4.5 times higher than the price for Merino lambs on a per-kilo basis, the highest the EMI to Merino lamb ratio has been in the last three years.
The relatively higher performance of wool makes it more likely producers with Merino lambs will retain them, rather than selling them for slaughter.
Mutton slaughter has proven high this year, and could even reach the 10 million head mark.
The mutton supply is being driven by the sell-off of ewes retained for breeding purposes during the rebuild.
MLA is tipping that producers with grass will be incentivised to hold them back from sale into current market conditions and shear fleece from them, with the current EMI to mutton ratio above seven - the highest level in over three years.
