THE WA sheep industry hasn’t failed – it’s refocused.
That is the view of Livestock Dynamics director Kimbal Curtis who was in Perth recently for the annual LIVEXchange conference at Crown Towers, and was talking about WA flock numbers dropping from 40 million head to 14m head since the 1980s.
“The key thing is that it has been a transition from a wool industry to a sheep meat and wool industry, and that explains a lot of what has actually happened,” Mr Curtis said.
He said the flock reduction hadn’t “just occurred by itself” and highlighted some things that might turn the numbers around – namely price, productivity, profitability and popularity.
Mr Curtis said the WA producer response to the issues of the 1980s was to either reduce sheep numbers – usually in favour of other enterprises and expand the property – or get out of the industry.
“From around the turn of the century the wool price has been trending upwards,” Mr Curtis said.
“This has been driven largely by a lack of supply.”
He said the price in 1988 was 1276c/kg clean and had since risen to the average price this year of 1408c/kg.
The Western Indicator price has since risen to a record high of 1731c/kg clean last month.
“The 1990s was also the time when the lamb meat industry was born – prior to the 1990s the lamb industry was largely a by-product of the wool industry,” Mr Curtis said.
“There was slow production and growth – it had a poor reputation and consumption was falling.
“Despite the take off of the lamb industry the WA flock was still Merino dominant – something like 80 per cent of the breeding ewes are Merino – another small proportion are first cross – then there are some others but they are by far the minority.
“The transfer to a lamb industry – or the uptake of lamb - is challenging in WA.
“We have a Mediterranean climate with a short breed and feeding window.
“It is difficult for producers to finish those lambs in that period, so feeding is critical and the timing is critical.”
Mr Curtis said over the past two decades lamb meat prices had been growing and had been “very strong”.
“In fact Meat & Livestock Australia has pointed out that lamb is the only main commodity produced in Australia that has had real growth in price over the last couple of decades,” he said.
Mr Curtis said despite the growth in the sheep meat industry, the numbers had dropped and at the same time the area on farm under crop had increased.
“Remember that most of the sheep in WA are on farms that are both cropping and grazing,” he said.
Mr Curtis said since 1990 the area under crop had increased by 40pc as the emphasis on cropping increased, but the consequence was that farmers removed fences, watering points, and they let facilities deteriorate – particularly yards and shearing sheds.
He said the consequence of increased cropping had been a bigger investment, with machinery debt that tended to “ratchet up the reliance on cropping and makes it that much more difficult to go back to sheep because those expensive pieces of machinery have a debt that needs to be repaid”.
“And for those farms that have completely destocked there is also the problem that they no longer have sheep as an option for weed management, which is a problem when herbicide resistance rears its head,” Mr Curtis said.
“They also lose out on price risk management – they don’t have the extra product for those poor seasons when sheep would still produce a wool clip even if the crop is not there.
“And if they have no sheep and the crop fails it can’t even be converted to stock feed.”
Mr Curtis said economic analysis had always shown that running sheep and crops together was always more profitable than running one system alone - especially in a risk situation.
Apart from the change in the size of the flock there has been a dramatic change in the composition – once wool stopped to be the overriding focus of the industry, wethers ceased to be as important and they have been largely phased out.
“Conversely with lamb production as an important component of the farm income – producing more lambs has been increasingly important,” he said.
“As a wool enterprise you only need to produce enough offspring to replace culls and losses.
“When those lambs become product or shippers they then become a key product and you need to produce more, and the more you produce, the more money you make.”
In 1990 there were just on 17 million ewes – now there is eight million.
“What is particularly interesting is that from those eight million ewes we are now slaughtering more lambs and producing more lambs – about 2.5m more than we were able to process when we had 17m ewes.
“The focus has completely changed.”
Mr Curtis said in 1990 there was about 12 million wethers in the flock but “today we couldn’t scratch together a million”.
While sheep numbers have dropped he said the industry was far from failing.
Mr Curtis said lamb weights had risen by 3kg and there had also been an increased carcase weight of sheep slaughtered for mutton production, resulting in about $58 million more income than in the 1990s.
Live exports have also risen $24m and wool quality had improved with the finest of the clip being down a couple of microns – improving its value.
“We have increased the wool clip - the amount of wool per head – that accounts for $48m,” Mr Curtis said.
“So for a billion dollar industry those productivity gains, despite the fact that we have only got 14 million sheep – are worth about $185 million per year, coming up towards 20pc more – so the industry hasn’t failed – its adapted.”
Looking to the future Mr Curtis said price was important but it’s not just a case of the higher the better, because it would reduce profit margins for exporters and processors.
He said with good prices and confidence in the market there would be an incentive to invest in the sheep industry.
Mr Curtis said the industry also needed to look at forward pricing, contracts and “out of season production” to prevent a “supply glut” – if the economics stacked up.
He said to improve productivity and profitability farmers needed to “grow the farm flock”.
“Run more sheep, produce more livestock, produce more wool, and make more profit,” Mr Curtis said.
“But it has to be done well.
“As you increase the stocking rate, and you put more pressure on the system, management becomes more important.”
Mr Curtis said benchmarking was also important to know what the performance level was relative to other producers in order to know if there was an opportunity to improve.
He said having a global benchmarking system in place could be a real benefit to producers.
“I think it’s an opportunity waiting to happen, though I know it won’t be easy to implement,” Mr Curtis said.
He said the industry needed a clear vision for the future that included technological innovations like bluetooth sensors and drones, that would make livestock handling easier and pasture management more productive.
“And if we bring all of this together – if it all comes to the point where it’s profitable and its attractive – it’ll create interest and investors will want to come,” Mr Curtis said.
He said there were signs that the WA flock was holding its ground but the growth, if any, would come from existing farmers because the price of entering the industry was too high, although that could change.
