Sheep to cattle – what's the cost?

23 Dec, 2008 05:46 AM
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With Australia's sheep flock continuing to decline and many wool producers converting their properties to cattle enterprises, much rhetoric has been dedicated to the impact this major shift has had on farms and their rural communities.

It's a debate which has prompted former Queensland farm advisor and now wool and beef producer, David Counsell, Dunblane, Barcaldine, to conduct an in-depth analysis on the costs of such a change beyond the farm-gate and put forward some real figures.

  • Independent research reveals costs of converting from sheep to cattle enterprise.
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With central western Queensland where Mr Counsell is based, particularly feeling the effects of the drop in sheep numbers, his benchmarking has pointed to economic downturn for central western Queensland rural communities when grazing properties convert from a wool production system to beef cattle.

"The Queensland sheep flock has fallen from 14 million in the 1980's to less than four million in 2007-2008," Mr Counsell said.

"There's a range of reasons why people are getting out of sheep, and in many cases, the decision to reduce sheep numbers or to stop grazing sheep altogether has been to due to the impact or threat of wild dog predation."

Mr Counsell conducted his analyses using benchmarking based on years of data collected from his own family's sheep and cattle operations.

The Counsells run a number of properties between Barcaldine and Isisford, comprising more than 30,000 Merinos. All of their properties are sheep operations, with one a total cattle operation.

"My family's enterprises are pretty typical of what you get out in this part of the world, and although each enterprise is different, my analyses gives a ballpark figure on what those costs are likely to be," Mr Counsell said.

"Arid western Queensland from around Barcaldine and Longreach, right up into the north west around Hughenden and Winton, through to Charleville and Quilpie, all are really suffering from the impact of producers reducing sheep numbers or changing completely."

Mr Counsell's findings should be ringing alarm bells for many, particularly local and State governments, and how they address issues such as wild dog control.

He has found that a grazing property that changes from running a 10,000 DSE (dry sheep equivalent) sheep flock to a cattle enterprise of comparable size would expect the following:

• A reduction of $58,500 per annum in wages paid to casual staff that come onto the property during the year. Assuming an average full-time wage of $46,000 per annum, this equates to a lost opportunity in employment of approximately 1.27 full-time persons per annum.

• A decrease in the number of days that casual staff is employed from approximately 206 man days to 30 man days. Assuming 200 working days per annum, this suggests the loss of almost one full years work for farm workers such as shearers, contract musters, shed staff, etc from the local town. A significant loss of skill and experience from the industry occurs as these workers exit the industry, the lost value of which is unmeasurable.

• The loss of every 10,000 DSE wool sheep flock from a district can potentially mean the loss of 1 to 1.3 families from that community.

• Sales of merchandise and chemicals by local rural agencies would fall by approximately by $11,000 per annum for every 10,000 DSE property that converts from sheep to cattle.

• Total agency income (merchandise sales plus livestock and wool sale commissions) would expect to fall by $16,500, from $34,000 to $17,500.

• In any conversion from sheep to cattle, MLA stands to gain levy income of $1700 and AWI and AWEX stands to lose by $6000.

• Expenditure on direct freight would increase by approximately $7700 per annum.

Mr Counsell said the impact on stock and station agencies would also flow-on to other local businesses and services, such as schools.

"Stock and station agencies lose about 50 percent of their gross total sales when something like this happens," he said.

"In many cases, beef producers are able to negotiate the sale of their cattle outside the normal process with agents, such as sales of cattle direct to works.

"In these cases, commissions earned from cattle sales by stock agencies would be less than what is reflected in this paper.

"Whilst sheep producers also have a capacity to sell sheep directly, wool producers are generally unable to avoid paying their brokerage from wool sales.

"People can go off and have debates about the impacts and talk a lot, but I've come up with these numbers that I believe are probably pretty right."

He said another aspect that needed to be examined by producers and the agricultural industry as a whole was whether sheep or cattle were the more profitable of the two.

"There is little or no quality benchmark information that examines the profitability of various farm enterprises such as sheep or cattle in the western regions of Queensland."

The impact of people with skills leaving the sheep industry also needed to be addressed, according to Mr Counsell.

"No value is placed on the loss of skills and experience as former sheep industry employees exit the sheep and wool industry.

"Several anecdotal comments made by various wool managers indicate that whilst casual workers staff can be found, that they lack the skills required and require far higher levels of training and supervision."

While Mr Counsell said he had no problems sourcing contractors for his own sheep operations, he was frustated by the negative discussion and politics that had tended to dog the wool industry in recent years.

"I think there are lot of opportunities in the sheep wool industry and we need to be talking about those a lot more."

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Queensland Country Life

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