Livestock provides diversity

Livestock provides diversity


Sheepmeat
Livestock Pricing managing director Rob Kelly said there was definitely an opportunity for producers to maximise returns, especially with sheepmeat, as opposed to total cropping.

Livestock Pricing managing director Rob Kelly said there was definitely an opportunity for producers to maximise returns, especially with sheepmeat, as opposed to total cropping.

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The debate about whether cropping or running livestock is more profitable continues in WA.

Aa

THE debate about whether cropping or running livestock is more profitable continues in WA.

Recent data shows that it depends on what area of the State the operation is located, seasonal conditions, demand and good management practices.

According to Farmanco management consultant Greg Easton, it has been more profitable to be a broadacre farmer over the past 10 years compared to a livestock producer in the medium rainfall zone in WA.

Mr Easton, based at Mundaring, published data collected from 150-160 clients in the medium rainfall zone across WA on Twitter recently where it was revealed that oaten hay, wheat and canola were the three most profitable enterprises from 2007-2017 on average.

Making $153 per hectare, $137/ha and $129/ha respectively on average in that time.

Last year's data (2018) was not published yet but Mr Easton expected it to be similar with sheep profitability and barley rising, while canola dropped back due to the impact of frost.

"Sheep were probably about $20 less profitable per hectare in 2018 than 2017 due to higher prices in feed costs and it will most likely be the same this year," Mr Easton said.

He said in 2012-2013 the sheep industry took a hit from the live cattle trade disruption to Indonesia and it took about four years to recover, until 2016.

Mr Easton said in order for a sheep enterprise to remain profitable in 2019-2020 it should look at maintaining the existing flock and expanding through improved lambing rates.

"What we found is that if you buy in ewes and have 2-3 per cent losses you lose some value at the end," Mr Easton said.

"Producers need to take into consideration the price of the sheep they buy in and not over capitalise."

Mr Easton said the data showed the average performance over the 10 years and it did not reflect every enterprise.

"Some performed better than the average," he said.

He said oaten hay showed the most surprising result but overall it highlighted why over the past decade the focus in WA had been on producing cereal crops like wheat, barley and canola at the expense of livestock.

Mr Easton said over the past three years the improvement in sheep gave broadacre farmers in the higher frost prone areas another option to mitigate risk.

He said "keep an eye on the Eastern States grain market and the demand from restockers for sheep".

"Livestock prices will be alright for the next couple of years but grain prices could be significant."

The Farmanco figures have been countered by five year average enterprise margin data from Icon Agriculture and the Compass Ag Alliance which was gathered in the higher rainfall zone of WA.

Icon Agriculture's Andrew Ritchie said there was no such thing as one crop being planted year in year out in the same paddock because of diseases and weeds, so it was hard to put sheep up against one crop like wheat.

And sheep were also generally being run on the poorer country in the lower rainfall areas, which was making the most out of the land.

"You have to assemble their rotation and that's different to everybody," Mr Ritchie said.

"The main rotations in our areas are barley, canola and oats, and sheep have exceeded crops every year for the past five years."

The data was from Merino flocks with 25-30pc mated to a terminal sire.

Mr Ritchie said sheep returns were better than cropping with a gross margin of $282.20 per sheep per used hectare, compared to $192.40 crop gross margin because they could be run year after year in the same paddocks.

"Our data shows that the most profitable guys run 50:50 sheep and cropping," Mr Ritchie said.

"They are complementary."

Mr Ritchie said while the input costs were going up (about 15pc of total margin) and more was being spent there was more also being returned.

"The feed cost has been in line with total increase in profit," he said.

Mr Ritchie said wool was still exceeding meat revenue although both were profitable.

He said some things that producers should pay attention to in order to remain profitable was "attention to detail" regarding control of parasites, insects, weeds and worms.

"There are parallels with feed and fertiliser," he said.

"Those improving pastures were generating greater returns."

WA Grains Group chairman Doug Smith, Lake Grace, said he had recently returned to running sheep, in small numbers, after his son returned to the farm and expressed an interest in it.

Mr Smith said the family went out of sheep 15 years ago but they had "just got back into lamb production and Merinos as well".

"Livestock was in the dregs for a big chunk of the early 2000s but I think now we are seeing very good prices," Mr Smith said.

"Will it stay there? - I hope so.

"Though it needs to come back to a more sustainable price where we don't get consumer resistance.

"We will see it go back but hopefully not to what it was."

Mr Smith said many corporate enterprises had removed all their livestock infrastructure and it was not possible to replace it quickly, if they changed their operations.

The Smiths are still 99 per cent cropping but the sheep handling and shearing infrastructure on the farm was still intact in order to run sheep, they just needed to replace some old fences.

He said in the Lake Grace area they had experienced frosts for the past four or five years, which made cropping "a bit tough".

Because of that people were starting to think more in terms of mixed enterprises.

"Not too many farmers can survive on one income stream - they need some diversity," Mr Smith said.

"A lot of guys would not make much money out of livestock this year given the amount of feeding out they have had to do due to the seasonal conditions.

"The grains industry is also having to feed the livestock industry.

"You have seen producers trying hard to maintain their core breeding nucleus and it will probably be 12 months before we see any results from that."

Mr Smith said livestock was fairly labour intensive and it was not easy to find workers willing to do the hard work, which was why most of the year farmers did the work themselves.

He said it was hard enough finding workers for short-term periods like seeding and harvest time.

Mr Smith said the grains industry was facing its own challenges, especially from Black Sea competition and a changing climate.

"There's a few freight trains coming our way in the grains industry," he said.

"Black Sea competition will see Ukraine outdoing Russia in terms of volume and we are losing market share in Indonesia to them.

"It's also getting harder to produce grains in Australia due to the climate.

"And then there's ag inflation - the costs on farm are outstripping general inflation.

"Growers' terms of trade is going backwards."

Mr Smith said Australia was nearing the point where broadacre farmers were not able to produce anymore from the farmland available due to the lack of skilled labour because one producer could only do so much.

Livestock Pricing managing director Rob Kelly said where sheep prices were at the moment, there was definitely an opportunity for producers to maximise returns, especially with sheepmeat, as opposed to total cropping.

"I'm biased because of my business but it's good risk management practice to have diversity in the business," Mr Kelly said.

"You can push your cropping programs and with good weather it will pay off, livestock give you a bit more time to reach to things like adverse weather, so it's lower risk.

"In the longer-term average livestock have got a lot of potential."

Mr Kelly said the view for most people was that the market trends didn't change as quickly with livestock as it did with grain.

"It's a bit more resilient because it takes longer to build breeding flocks than it does to produce grain, which enables producers to plan for a few years," he said.

Mr Kelly said prices had hit record levels this year for lamb and wool while mutton was also stronger than it had been for years.

"I can't see when the trend is going to change in the near term, red meat demand is strong and it takes time to build numbers again so supply can't rebound as quickly as we see with grain," he said.

Mr Kelly said with improved technology in the livestock handling and management sector it made running sheep more attractive as an option for farmers, but there was also a need to "increase the amount of forward contracts for producers", as well as better understand how they worked.

"Merino sheep producers have some protection because of the high cost of entering the industry when calculating the infrastructure that is needed to operate a successful business," Mr Kelly said.

"Because of that they should be able to cash in on the wool prices without much competition coming into the market."

Mr Kelly said international demand was driving the costs of wool and sheepmeat up and if he was a producer he would ensure his "breeding capacity is up".

"I'd be more focused on the meat side of things as opposed to wool," he said.

"Merinos are doing well because of the wool market but they do have lower lambing and weaning rates and that impact can be significant.

"Then again they can produce crossbred lambs to access that market as well."By AIDAN SMITH

THE debate about whether cropping or running livestock is more profitable continues in WA.

Recent data shows that it depends on what area of the State the operation is located, seasonal conditions, demand and good management practices.

According to Farmanco management consultant Greg Easton, it has been more profitable to be a broadacre farmer over the past 10 years compared to a livestock producer in the medium rainfall zone in WA.

Mr Easton, based at Mundaring, published data collected from 150-160 clients in the medium rainfall zone across WA on Twitter recently where it was revealed that oaten hay, wheat and canola were the three most profitable enterprises from 2007-2017 on average.

Making $153 per hectare, $137/ha and $129/ha respectively on average in that time.

Last year's data (2018) was not published yet but Mr Easton expected it to be similar with sheep profitability and barley rising, while canola dropped back due to the impact of frost.

"Sheep were probably about $20 less profitable per hectare in 2018 than 2017 due to higher prices in feed costs and it will most likely be the same this year," Mr Easton said.

He said in 2012-2013 the sheep industry took a hit from the live cattle trade disruption to Indonesia and it took about four years to recover, until 2016.

Mr Easton said in order for a sheep enterprise to remain profitable in 2019-2020 it should look at maintaining the existing flock and expanding through improved lambing rates.

"What we found is that if you buy in ewes and have 2-3 per cent losses you lose some value at the end," Mr Easton said.

"Producers need to take into consideration the price of the sheep they buy in and not over capitalise."

Mr Easton said the data showed the average performance over the 10 years and it did not reflect every enterprise.

"Some performed better than the average," he said.

He said oaten hay showed the most surprising result but overall it highlighted why over the past decade the focus in WA had been on producing cereal crops like wheat, barley and canola at the expense of livestock.

Mr Easton said over the past three years the improvement in sheep gave broadacre farmers in the higher frost prone areas another option to mitigate risk.

He said "keep an eye on the Eastern States grain market and the demand from restockers for sheep".

"Livestock prices will be alright for the next couple of years but grain prices could be significant."

The Farmanco figures have been countered by five year average enterprise margin data from Icon Agriculture and the Compass Ag Alliance which was gathered in the higher rainfall zone of WA.

Icon Agriculture's Andrew Ritchie said there was no such thing as one crop being planted year in year out in the same paddock because of diseases and weeds, so it was hard to put sheep up against one crop like wheat.

And sheep were also generally being run on the poorer country in the lower rainfall areas, which was making the most out of the land.

"You have to assemble their rotation and that's different to everybody," Mr Ritchie said.

"The main rotations in our areas are barley, canola and oats, and sheep have exceeded crops every year for the past five years."

The data was from Merino flocks with 25-30pc mated to a terminal sire.

Mr Ritchie said sheep returns were better than cropping with a gross margin of $282.20 per sheep per used hectare, compared to $192.40 crop gross margin because they could be run year after year in the same paddocks.

"Our data shows that the most profitable guys run 50:50 sheep and cropping," Mr Ritchie said.

"They are complementary."

Mr Ritchie said while the input costs were going up (about 15pc of total margin) and more was being spent there was more also being returned.

"The feed cost has been in line with total increase in profit," he said.

Mr Ritchie said wool was still exceeding meat revenue although both were profitable.

He said some things that producers should pay attention to in order to remain profitable was "attention to detail" regarding control of parasites, insects, weeds and worms.

"There are parallels with feed and fertiliser," he said.

"Those improving pastures were generating greater returns."

WA Grains Group chairman Doug Smith, Lake Grace, said he had recently returned to running sheep, in small numbers, after his son returned to the farm and expressed an interest in it.

Mr Smith said the family went out of sheep 15 years ago but they had "just got back into lamb production and Merinos as well".

"Livestock was in the dregs for a big chunk of the early 2000s but I think now we are seeing very good prices," Mr Smith said.

"Will it stay there? - I hope so.

"Though it needs to come back to a more sustainable price where we don't get consumer resistance.

"We will see it go back but hopefully not to what it was."

Mr Smith said many corporate enterprises had removed all their livestock infrastructure and it was not possible to replace it quickly, if they changed their operations.

The Smiths are still 99 per cent cropping but the sheep handling and shearing infrastructure on the farm was still intact in order to run sheep, they just needed to replace some old fences.

He said in the Lake Grace area they had experienced frosts for the past four or five years, which made cropping "a bit tough".

Because of that people were starting to think more in terms of mixed enterprises.

"Not too many farmers can survive on one income stream - they need some diversity," Mr Smith said.

"A lot of guys would not make much money out of livestock this year given the amount of feeding out they have had to do due to the seasonal conditions.

"The grains industry is also having to feed the livestock industry.

"You have seen producers trying hard to maintain their core breeding nucleus and it will probably be 12 months before we see any results from that."

Mr Smith said livestock was fairly labour intensive and it was not easy to find workers willing to do the hard work, which was why most of the year farmers did the work themselves.

He said it was hard enough finding workers for short-term periods like seeding and harvest time.

Mr Smith said the grains industry was facing its own challenges, especially from Black Sea competition and a changing climate.

"There's a few freight trains coming our way in the grains industry," he said.

"Black Sea competition will see Ukraine outdoing Russia in terms of volume and we are losing market share in Indonesia to them.

"It's also getting harder to produce grains in Australia due to the climate.

"And then there's ag inflation - the costs on farm are outstripping general inflation.

"Growers' terms of trade is going backwards."

Mr Smith said Australia was nearing the point where broadacre farmers were not able to produce anymore from the farmland available due to the lack of skilled labour because one producer could only do so much.

Livestock Pricing managing director Rob Kelly said where sheep prices were at the moment, there was definitely an opportunity for producers to maximise returns, especially with sheepmeat, as opposed to total cropping.

"I'm biased because of my business but it's good risk management practice to have diversity in the business," Mr Kelly said.

"You can push your cropping programs and with good weather it will pay off, livestock give you a bit more time to reach to things like adverse weather, so it's lower risk.

"In the longer-term average livestock have got a lot of potential."

Mr Kelly said the view for most people was that the market trends didn't change as quickly with livestock as it did with grain.

"It's a bit more resilient because it takes longer to build breeding flocks than it does to produce grain, which enables producers to plan for a few years," he said.

Mr Kelly said prices had hit record levels this year for lamb and wool while mutton was also stronger than it had been for years.

"I can't see when the trend is going to change in the near term, red meat demand is strong and it takes time to build numbers again so supply can't rebound as quickly as we see with grain," he said.

Mr Kelly said with improved technology in the livestock handling and management sector it made running sheep more attractive as an option for farmers, but there was also a need to "increase the amount of forward contracts for producers", as well as better understand how they worked.

"Merino sheep producers have some protection because of the high cost of entering the industry when calculating the infrastructure that is needed to operate a successful business," Mr Kelly said.

"Because of that they should be able to cash in on the wool prices without much competition coming into the market."

Mr Kelly said international demand was driving the costs of wool and sheepmeat up and if he was a producer he would ensure his "breeding capacity is up".

"I'd be more focused on the meat side of things as opposed to wool," he said.

"Merinos are doing well because of the wool market but they do have lower lambing and weaning rates and that impact can be significant.

"Then again they can produce crossbred lambs to access that market as well."

Aa

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