Managing costs/investment
Improved returns from sheep and wool sales cause farmers to consider purchasing stock to get back into or increase their sheep enterprise. At this time young ewes will be relatively expensive, but farmers with extra feed may hope to make use of it. How would the capital cost of purchasing ewes compare against retaining more bred ewes, how long will it take to recoup the cost, and to achieve a stable flock structure?
Current modelling found that the most cost-effective option, with moderate debt and a reasonable time to achieve debt payback, was to increase the lambing percentage from 90-105%. By improving ewe management, a farmer would be able to increase his sheep enterprise without purchasing ewes when the market was high.
This option compared favourably with buying ewes into an existing enterprise, retaining older ewes, increasing the number of ewe lambs retained, or starting a new sheep enterprise including essential sheep infrastructure.
Doing business
When planning for the longer-term, farmers rely significantly on their consultants for the likely outlook for the sheep industry. A selection of WA consultants to the sheep industry were interviewed in 2016 and the majority of respondents (24) were considered to be ‘generally positive’ toward the sheep enterprise.
Having a management plan with long- and short-term breeding objectives was one of the features shared by 23 high-performing sheep businesses in WA.
Other features included monitoring ewe condition, culling of dry ewes and early supplementary feeding. All the businesses assessed their sheep enterprise performance every year, mainly with financial benchmarking or productivity performance (lambs per hectare).
Agribusiness looking to increase the profitability of sheep production may look to novel business structures. Options that were modelled include joint venture finance, vertically-integrated companies, livestock leasing and pasture development.
A vertically-integrated model that used joint venture finance was found to meet objectives of economies of scale, productivity, capital attraction and the development of new value chains.
The WA sheep industry has capacity to increase production, which would support sheep processors to continue to supply domestic and export markets. Insufficient and seasonal supply puts these markets at risk when customers require a regular supply of sheepmeat.
There seem to be a number of barriers that have discouraged sheep farmers from increasing production in recent years. These have included the relative grain, wool and sheepmeat prices, the capital cost of new technology, the reduced size of WA sheep enterprises, and the impact on breeding objectives of variable feed availability and commodity prices.
Potential opportunities to encourage industry expansion include greater use of the sheep enterprise to offset cropping risks, novel ways to manage capital expenditure on new technology and improved communication of market specifications and prices.