Implications of management decisions on the WA sheep flock in response to changing markets

The Western Australian (WA) sheep industry consists of more than 4000 individual producers, processors and exporters, as well as the many businesses and industries that support them.

This report examines how producers’ management decisions could significantly change the size, structure and productivity of the WA sheep flock in the short and medium term.

It focuses on the impact of these changes to the WA flock at a state level, rather than an individual business level.

Consultation between Department of Primary Industries and Regional Development (DPIRD) staff and members of the Live Export Reference Group identified four key scenarios developed from possible producer responses to changing sheep markets.

It was considered possible that:

• the proportion of wethers in the WA flock could increase with a corresponding reduction in the proportion of ewes
• the ratio of ewes joined to Merino rams and ewes joined to non-Merino rams could change
• the amount of land dedicated to the sheep enterprise could change or
• the type of sheep or the number of sheep transferred interstate could change.

These four scenarios were compared to a baseline model based on the current size and structure of the WA flock.

To reduce the complexity, each scenario was modelled in isolation to examine the possible effects on the WA sheep flock, lamb turn-off and wool production over a 10-year period in the absence of live sheep exports.

The results showed the importance of the number and proportion of breeding ewes in the flock.

They demonstrated the significant impact that changes in the breeding ewe component has on the WA flock due to the effect on the number of lambs available for slaughter and replacement, and the volume of sheepmeat and wool produced. Production is most sensitive to the number of breeding ewes in the flock because of the importance of lamb production. Any reduction in the number of ewes results in fewer lambs produced and available as replacements and fewer lambs turned off.

Of the four scenarios investigated over a 10-year period, the largest declines in flock size and productivity occurred when there was an increase in the proportion of wethers from 7% to 15% of the state flock at the expense of the breeding ewe flock. 

Increasing the proportion of ewes transferred interstate had a bigger impact on the total flock than increasing the number of sheep transferred interstate and the flock took longer to recover. When the number of sheep transferred interstate was increased the size of the flock declined, however it did recover over time with reduced turn-off and wool production during the rebuilding phase.

The most efficient way to maintain the WA sheep flock and hence turn-off is by increasing marking rates which results in more lambs per ewe. Alternatively reducing the slaughter of lambs and retaining more ewe lambs for breeding would also increase sheep numbers. Small changes such as selling wethers at a younger age allow for more ewes to be retained without increasing the resources (land, feed, water) consumed, compared to keeping wethers to five years of age.

Preliminary modelling showed the effect of marking rates on turn-off and flock size. An 80% marking rate resulted in a dramatic decline of more than 25% in flock size over 10 years. The turn-off, lambs marked and wool production all declined by 24 - 27%, and the flock declined from 13.5 million to 9.8 million.

The average marking rate used in this report was 90%, which was based on an analysis of rates reported by several sources and allowed a realistic and sustainable population to be modelled that had a fairly consistent flock size.

Although WA sheep producers act independently of each other, their collective decisions can result in large changes to the WA sheep flock.  It is the net result of these decisions that determines sheepmeat and wool production, with flow-on effects to other sheep producers, rural communities, and support industries.

A decline in the flock size or structure must be identified early as there is a long turnaround time involved in livestock breeding.

Flock rebuilding is dependent on the productivity of local ewes. Because the importation of sheep into WA is strictly limited, the industry depends on local ewes to increase the state flock.

Where producers have difficulty getting lambs up to processor specifications, a profitable outlet for these sheep has been to sell into the live export trade. If this option is unavailable, some will opt to retain the wethers for wool production subject to favourable wool prices. This was modelled as Scenario 1.

In this scenario the proportion of wethers in the flock was increased from 7% to 15% at the expense of ewes.

This scenario caused the largest decline in flock size. The flock declined from 13.5 million to 10.2 million over 10 years. Lamb slaughter and wool production followed a similar pattern due to the declining flock size, illustrating major impacts on the production of sheepmeat and wool.

An alternative approach to overcoming the difficulty in getting Merino lambs to processor specifications is to change to crossbred or meat breed lambs. These generally grow faster and reach maturity earlier thus increasing the compliance rates at the abattoir. This is the logic behind Scenario 2.

Over the past 30 years in WA, the proportion of ewes joined to Merino (wool) rams or to meat sires has generally shifted from mostly wool joinings to more of a balance between wool and meat joinings. The current ratio and the value used in the baseline model is 61% of ewes joined to Merino rams.

The proportion of ewes joined to Merino rams was modelled as 50%, 65% or 70% of ewes, with the balance being joined to non-Merino rams. The differences between the alternatives and the baseline after a 10-year period were all very small.

Producers in areas where cropping is a viable option often use stubbles to prepare sheep for the live export trade. In the absence of the live export trade, these producers may choose to reduce sheep numbers and increase the cropping program. Conversely, if lamb and wool prices are favourable relative to grain prices, some producers might expand the area allocated to winter grazing and thereby increase sheep numbers. A change in area of farm land for sheep production is considered in Scenario 3.

On average about 30% of arable farm land was allocated to sheep and wool production in WA. Extrapolated values suggest that if the percentage declined from 30% of the average farm to 20%, it would result in the WA flock declining to 9.7 million head, a reduction of 33%.

Increasing the percentage of land used for sheep production by reducing that allocated to other enterprises, such as cropping, increases the potential WA flock size. However the ability to rapidly change to a larger flock while maintaining similar stocking rates will rely on increasing the marking rate significantly, keeping more lambs and/ or retaining older ewes.

Getting back into sheep or rebuilding a flock requires significant capital investment (sheep, fencing, yards, water etc.) and time, with estimates that a whole-farm breakeven period is between nine and 11 years.

The selling of sheep and lambs to eastern Australia can both supplement processor demand in those states and also assist producers trying to rebuild their flocks. Interstate transfers rise significantly when interstate demand rises relative to the demand in WA. This tends to be associated with the period immediately after drought breaking rains in the east, and is greatest when WA suffers a late break or dry season. Scenario 4 looks at the impact of interstate transfers.

Of the alternatives in this scenario, changes in the proportion of breeding ewes transferred to eastern Australia had the largest impact on the WA sheep flock.

When the number of sheep transferred interstate stayed at 2% of the opening number, and was made up of 70% ewes and 30% lambs,  the flock suffered an 8% (-1.1 million head) decline over 10 years.

Conversely when 30% ewes and 70% lambs were transferred, a small increase in the WA flock resulted. This was the only scenario modelled where the flock grew in size. This is due to the breeding ewes being kept in the system allowing for more lambs to be born and become replacement stock. It also allowed for higher rates of turn-off and higher wool production off the back of a larger flock.

When 1 million sheep were transferred interstate in Year 1 there were 13% fewer lambs slaughtered in Year 1 compared to the baseline (2.7 million head compared to 3.1 million head) but by Year 10 the number of lambs slaughtered had recovered to 3.0 million head.