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Beyond the Bale : March 2016
ON FARM 29 While the prime lamb industry continues to thrive, at its core remains a Merino ewe flock. For more than 15 years the Merino ewe flock has been declining but recent evidence from the Australian Bureau of Statistics suggests the decline may have stopped and even begun swinging upwards as more realise the options a Merino operation brings. “You must run what best suits your country and do it well” is the over-riding message from many experts, but within the analysis many are finding wool is holding its own over time. An example of this is 2015 ‘Relative Sheep Enterprise Performance’ conducted by NSW Department of Agriculture Technical Specialist Phil Graham. His modeling work took into account 54 years worth of data, rainfall records and actual prices across six NSW sites and examines the production and financial performance for a traditional prime lamb (PL) operation (first cross ewe), a Merino to terminal (MT), and 18-micron and 20-micron self-replacing Merino operations. His model can be adapted to any part of Australia. Phil is urging sheep producers do look at profit and not just income as the traditional prime lamb enterprise may well produce a higher income but with it comes higher risks and higher costs, particularly where replacement ewes are concerned. “Looking at a lot of years’ figures it is clear that prime lamb enterprises in good years have been doing very well but in the bad years those same enterprises have really struggled. A 20-micron self-replacing Merino flock in the same climate has shown a lot more financial resilience and a lot more versatility. “A Merino income will always give you three incomes in terms of wool, meat and surplus animals as well as the versatility surrounding Merino wethers. In recent times well bred 13-month old Merino wethers have been fetching prices close to the best prime lambs and when you consider a fleece on top of that, it is a very good string to your bow.” The below figure is an example summary of this comparison. It compares the yearly profit per hectare of the traditional prime lamb enterprise to that of a self-replacing 20-micron Merino flock at Cootamundra, ranked according to yearly profit/ha over the past 54 years. For a majority of the years, the prime lamb enterprise has outranked the Merino enterprise but the significant variation in profit for the prime lamb operation is worth noting. Perhaps the most striking observation is the significant drop in prime lamb profits when seasons have been poor. “Prime lamb operations have in general been very profitable of late but the truth is that wool prices have been very solid in recent years and particularly around 20-micron where wool returns have been very strong indeed. The good lamb prices are of course also reflected in strong mutton prices and this is where a Merino enterprise gets a good kick- along,” Phil said. “The three drought years have a big impact on the long term profitability of the prime lamb enterprise. The difference in cash flow between the two enterprises from the three droughts is $990/ha. It takes 13 good years (or 25% of the time studied) for the prime lamb operation to wipe out the difference from the three bad years. People could argue that a strategy to lower feeding costs will counter this effect. Destocking will lower feeding costs but it also lowers future income, so when looked at over a long period the effect shown in the graphic will still apply,” Phil adds in his report. One advantage with wool genetics is that improvements to fibre diameter and fleece weight, which increase profits have very little impact on the feed required to maintain the flock. The Merino ewe to terminal ram cross separates the benefits of improved lamb growth from the negative of increasing the size of the mature ewe. Having adapted his work across for Tasmania as well as New South Wales, Phil concludes: “Successful producers run efficient enterprises they like and that suit their country. They focus on getting management and genetics right and not being swayed by short term fads.” MORE INFORMATION For a copy of his report contact Phil Graham, NSW Agriculture, firstname.lastname@example.org TO PROVE ITS WORTH WOOLGROWING CONTINUES There is a growing body of financial, production and benchmarking data that confirms the value and versatility of wool-growing as an enterprise. 650 550 450 350 250 150 50 -50 -150 -250 -3 50 20um PL ANNUAL PROFIT/HECTARE AT COOTAMUNDRA RANKED OVER PAST 54 YEARS: 20-MICRON SELF-REPLACING FLOCK VERSUS FIRST CROSS PRIME LAMB OPERATION
In the Shops - March 2016