DATA collated over a 50-year span of sheep production reveals no sheep enterprise is superior.
NSW Department of Primary Industries technical specialist Phil Graham presented his research, 2015 Relative Sheep Enterprise Performance, during the Elders Balmoral Sire Evaluation field day in Victoria’s Western District recently where he found meat based enterprises were not always the most profitable.
His modelling work took into account 54 years’ of rainfall records and average prices for 2015, across eight sites in NSW, Victoria and Tasmania and examined the production and financial performance for a traditional first cross ewe, or prime lamb (PL), a Merino to terminal (MT), and 18-micron and 20-micron self-replacing Merino operations. It was adapted to regions in Victoria and Tasmania with a similar conclusion.
The yearly profit per hectare of the traditional prime lamb enterprise compared to a self-replacing 20-micron Merino flock at Cootamundra, NSW – according to yearly profit per hectare over the past 54 years – revealed prime lamb enterprises outranked Merino enterprises in the majority of the years but had a significant drop in profits when seasons were poor.
“The three drought years have a big impact on the long term profitability of the prime lamb enterprise,” he said. “The difference in cash flow between the two enterprises from the three droughts is $990 per ha.
“It takes 13 good years, or 25 per cent of the time, for the prime lamb to wipe out the difference from the three bad years.”
He said the 2015 results proved it was not the enterprise that was critical but how the enterprise was managed that was the major driver of profits. Prime lamb enterprises, in good years, had performed very well, although in dry conditions, those same enterprises struggled.
“A 20-micron self-replacing Merino flock in the same climate has shown a lot more financial resilience and versatility,” Mr Graham said. “A Merino income will always give you three incomes in terms of wool, meat and surplus animals.
“In recent times, 15-month old Merino wethers have been fetching mutton prices close to Merino lambs prices and when you consider a fleece on top of that, it is a very good string to your bow.”
Mr Graham urged sheep producers to look at profit, rather than income.
“The perception wool is lagging behind isn’t correct,” he said. “Lamb enterprises have higher income but this comes at higher costs. The cost of replacement ewes has offset the improved lamb price while the improved sale price of surplus ewes has added to the improvement in the self-replacing enterprises.”
