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Beyond the Bale : December 2011
FAST FACTS l Benchmarking data shows the profitability of all types of farm enterprises over the long term is fairly equal. l With a return to high wool prices, producers are realising the value of wool enterprises. l Mixed farmer Lachie Singh from the South Australian wheat-sheep zone says his self-replacing Merino flock is an important enterprise in the family farm. How and where wool fits in a mixed enterprise has often been a difficult question for many producers, but those producers who fit wool within their business find it does work and is an important additional enterprise. In recent years when producers saw strong grain prices, Merinos were often pushed out of the system, but with wool prices on the rise and grain prices having come off the boil, producers in the wheat- sheep zone are seeing the benefit of having a wool enterprise to manage their risk. While wool might have had a bad press for a few years, benchmarking research by Holmes Sackett shows there is no long term profitability difference between mixed and grazing farms or between enterprises. Consultant with Holmes Sackett, Sandy McEachern, says over the long term there is no clear agricultural enterprise which is most profitable. "If you look over a ten year period, the best performing enterprises in any business are very comparable," he says. "It is not the type of enterprise which will determine how much money you make, it is how well you do the enterprise. "The major issue is people aren't measuring profits. People tend to measure profit by watching prices, so when prices are high they think that is profitable, when prices are low they think it is unprofitable, but the reality is there is a whole other side of the equation, the cost structure, which is a key determinant." According to the Australian Bureau of Agricultural Research Economics and Sciences (ABARES), over the past decade the wheat-sheep zone has, on average, accounted for almost 30 per cent of annual wool production, so while the focus for a lot of woolgrowers might be cropping, the zone still accounts for a reasonable amount of Australia's annual wool production. Lachie Singh farms at Alawoona in the South Australian Mallee with his parents and says their self- replacing Merino flock is an important enterprise in the family farm. "I think livestock and cropping complement each other really well. The sheep keep the pasture paddocks tidy and the weeds down, and sheep are really important to the bottom line, especially in the poorer seasons," he says. Lachie runs a 1300 self-replacing Merino flock and crops around 2000ha annually on a two year rotation. He says while most of his neighbours have kept their sheep, there has been a decline in sheep numbers across the whole district, but says his family has always had sheep and he is keen to keep sheep as part of the mix. "We will be staying in wool, you've always had a return and it's promising that the wool price has come up, it sort of justifies the work you put in and it is good to get a reward," Lachie says. "I don't think people always think of the benefits of wool within a cropping enterprise, but if sheep are run properly there are good margins in it. "If you compare running livestock with cropping, as far as how many dollars you have to put in to get a dollar back out, running livestock in the Mallee is less risky." Lachie says one of the biggest challenges he has is time and prioritising between the two enterprises. "Sometimes time can be an issue, you should be drenching sheep and you're spraying or vice versa. A few weeks back we were shearing and I probably should have been spraying for rust; you've just got to try to manage it the best you can." MIXED ENTERPRISES BACK WOOL Woolgrower Lachie Singh from the South Australian Mallee: "If you compare running livestock with cropping, as far as how many dollars you have to put in to get a dollar back out, running livestock in the Mallee is less risky." "WE WILL BE STAYING IN WOOL, YOU'VE ALWAYS HAD A RETURN AND IT'S PROMISING THAT THE WOOL PRICE HAS COME UP, IT SORT OF JUSTIFIES THE WORK YOU PUTINANDITISGOODTO GET A REWARD" LACHIE SINGH 25 ON-FARM December 2011 BEYOND THE BALE