SHEEP enterprises in the Great Southern are expected to yield healthy returns in 2012, according to an analysis of farm businesses by the Department of Agriculture and Food.
The results were detailed to industry last week at the department's Agribusiness Sheep Updates in Perth.
Department senior economist Lucy Anderton said a Merino flock producing shipping wethers, was expected to be the most profitable sheep enterprise in 2012, with a gross margin, after covering all variable costs of $276/ha.
"This is on a wool price of $11.50/kg and shipping wethers selling for just under $100 a head," Ms Anderton said.
"A self-replacing Merino flock with the older ewes mated to terminal sires, should return $218/ha after paying variable costs, making it almost as profitable on a meat price of $4.20/kg for prime lamb and $10.50/kg for wool."
Ms Anderton said the most profitable farm enterprise in the Great Southern was likely to be canola.
She added the analysis was regionally targeted and results could not be extrapolated to central Wheatbelt or northern agricultural regions.
Agricultural economist Peter Rowe, who co-authored the report, said 2012 was shaping up to be a tough year for grain producers but those with sheep on their farms were likely to do well this year.
"The gross margin analysis looked at both above and below average seasons to examine the volatility of each enterprise and the sheep enterprises held up well, even during a poor year," he said. "Given the late break to 2012, we are probably looking at a slightly below average year at this stage of the season.
"Farmers are now being reminded of the benefits of a mixed farm with crop and sheep sharing the risk.
"It's not just about maximising lambing percentages, it's about maximising return per hectare which the best farmers achieve through managing the interactions between yield, prices and costs."
Mr Rowe said sheep profitability changed in 2009 as sheep sale prices took off and many farmers started to look at rebuilding their flocks. The rebuild was hindered by the drought in 2010 when unprecedented numbers of sheep were sent from WA across the Nullarbor.
"The fundamental drivers of sheep farming have now changed and when longer term prices are adopted, the profitability of canola, wool, sheep meat and wheat are all similar with gross margins expected to be between $220 and $240/ha for each," Mr Rowe said.
"I expect to see many farmers move their rotations back to having more sheep over the next couple of years, both for financial as well as rotational balance."
